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Estimating multi-country VAR models

  • Canova, Fabio
  • Ciccarelli, Matteo

This paper describes a methodology to estimate the coefficients, to test specification hypotheses and to conduct policy exercises in multi-country VAR models with cross unit interdependencies, unit specific dynamics and time variations in the coefficients. The framework of analysis is Bayesian: a prior flexibly reduces the dimensionality of the model and puts structure on the time variations; MCMC methods are used to obtain posterior distributions; and marginal likelihoods to check the fit of various specifications. Impulse responses and conditional forecasts are obtained with the output of MCMC routine. The transmission of certain shocks across G7 countries is analyzed. JEL Classification: C3, C5, E5

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Paper provided by European Central Bank in its series Working Paper Series with number 0603.

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Date of creation: Apr 2006
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Handle: RePEc:ecb:ecbwps:20060603
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  28. Canova, Fabio & Pappa, Evi, 2003. "Price Dispersions in Monetary Unions: The Role of Fiscal Shocks," CEPR Discussion Papers 3746, C.E.P.R. Discussion Papers.
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