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Uncertainty Through the Lenses of A Mixed-Frequency Bayesian Panel Markov Switching Model

Author

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  • Roberto Casarin
  • Claudia Foroni
  • Massimiliano Marcellino
  • Francesco Ravazzolo

Abstract

We propose a Bayesian panel model for mixed frequency data whose parameters can change over time according to a Markov process. Our model allows for both structural instability and random effects. We develop a proper Markov Chain Monte Carlo algorithm for sampling from the joint posterior distribution of the model parameters and test its properties in simulation experiments. We use the model to study the effects of macroeconomic uncertainty and financial uncertainty on a set of variables in a multi-country context including the US, several European countries and Japan. We find that for most of the variables financial uncertainty dominates macroeconomic uncertainty. Furthermore, we show that uncertainty coefficients differ if the economy is in a contraction regime or in an expansion regime. JEL codes: C13, C14, C51, C53. Keywords: dynamic panel model, mixed-frequency, Markov switching, Bayesian inference, MCMC.

Suggested Citation

  • Roberto Casarin & Claudia Foroni & Massimiliano Marcellino & Francesco Ravazzolo, 2016. "Uncertainty Through the Lenses of A Mixed-Frequency Bayesian Panel Markov Switching Model," Working Papers 585, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  • Handle: RePEc:igi:igierp:585
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    References listed on IDEAS

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    Cited by:

    1. Giovanni Caggiano & Efrem Castelnuovo & Juan Manuel Figueres, 2017. "Economic Policy Uncertainty Spillovers in Booms and Busts," Melbourne Institute Working Paper Series wp2017n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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