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A Nine Variable Probabilistic Macroeconomic Forecasting Model

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Listed author(s):
  • Christopher A. Sims

Abstract

A model for U.S. macroeconomic time series that has been used for forecasting for several years is described in some detail. The model is a multivariate Bayesian autoregression, with allowance for conditional heteroskedasticity, stochastic time-variation in parameters, and non-normality of disturbances. It specifies the prior distribution in ways that improve on previous Bayesian vector autoregression specifications in realism and forecasting performance. The model's record of forecasting in recent years is displayed and discussed.

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File URL: http://cowles.yale.edu/sites/default/files/files/pub/d10/d1034.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1034.

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Length: 37 pages
Date of creation: Oct 1992
Publication status: Published in James H. Stock and Mark W. Watson (eds.), Business Cycles, Indicators, and Forecasting, NBER, 1993, pp. 179-214
Handle: RePEc:cwl:cwldpp:1034
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  1. Geweke, John, 1994. "Priors for Macroeconomic Time Series and Their Application," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 609-632, August.
  2. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters,in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
  3. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  4. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
  5. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
  6. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  7. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Olivier J. Blanchard & Mark W. Watson, 1986. "Are Business Cycles All Alike?," NBER Chapters,in: The American Business Cycle: Continuity and Change, pages 123-180 National Bureau of Economic Research, Inc.
  10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
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  1. > Econometrics > Time Series Models > VAR Models > Bayesian Vector autoregressions (BVARs)
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