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VAR forecasting using Bayesian variable selection

  • KOROBILIS, Dimitris

    ()

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

This paper develops methods for automatic selection of variables in Bayesian vector autoregressions (VARs) using the Gibbs sampler. In particular, I provide computationally efficient algorithms for stochastic variable selection in generic linear and nonlinear models, as well as models of large dimensions. The performance of the proposed variable selection method is assessed in forecasting three major macroeconomic time series of the UK economy. Databased restrictions of VAR coefficients can help improve upon their unrestricted counterparts in forecasting, and in many cases they compare favorably to shrinkage estimators.

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File URL: http://uclouvain.be/cps/ucl/doc/core/documents/coredp2011_22web.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011022.

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Date of creation: 01 May 2011
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Handle: RePEc:cor:louvco:2011022
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  1. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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  5. Chan, Joshua C C & Koop, Gary & Leon-Gonzalez, Roberto & Strachan, Rodney W, 2010. "Time Varying Dimension Models," SIRE Discussion Papers 2012-33, Scottish Institute for Research in Economics (SIRE).
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  8. D'Agostino, Antonello & Gambetti, Luca & Giannone, Domenico, 2009. "Macroeconomic Forecasting and Structural Change," CEPR Discussion Papers 7542, C.E.P.R. Discussion Papers.
  9. Korobilis, Dimitris, 2008. "Forecasting in vector autoregressions with many predictors," MPRA Paper 21122, University Library of Munich, Germany.
  10. Garratt, Anthony & Koop, Gary & Mise, Emi & Vahey, Shaun P., 2009. "Real-Time Prediction With U.K. Monetary Aggregates in the Presence of Model Uncertainty," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 480-491.
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  13. Koop, Gary & Korobilis, Dimitris, 2011. "Forecasting Inflation Using Dynamic Model Averaging," SIRE Discussion Papers 2011-40, Scottish Institute for Research in Economics (SIRE).
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  18. KOROBILIS, Dimitris, 2011. "Hierarchical shrinkage priors for dynamic regressions with many predictors," CORE Discussion Papers 2011021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Koop, Gary & Korobilis, Dimitris, 2009. "Bayesian Multivariate Time Series Methods for Empirical Macroeconomics," MPRA Paper 20125, University Library of Munich, Germany.
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