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Panel Index Var Models: Specification, Estimation, Testing And Leading Indicators

  • Fabio Canova

    (Universitat Pompeu Fabra)

  • Matteo Ciccarelli

    (Universidad de Alicante)

This paper integrates panel VARs and the index models into a unique framework where cross unit interdependencies and time variations in the coefficients are allowed for. The setup used is Bayesian and MCMC methods are used to estimate the posterior distribution of the features of interest and to verify hypothesis concerning the model specification. The approach reduces substantially the dimensionality of the problem, can be used to construct multiunit forecasts, leading indicators and to conduct policy analysis in a multiunit setups. The methodology is employed to construct leading indicators for inflation and GDP growth in the Euro area.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-21.pdf
File Function: Fisrt version / Primera version, 2002
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-21.

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Length: 40 pages
Date of creation: Nov 2002
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2002-21
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  1. Canova, Fabio, 1993. "Modelling and forecasting exchange rates with a Bayesian time-varying coefficient model," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 233-261.
  2. Mario Forni & Lucrezia Reichlin, 1998. "Let's get real: a factor analytical approach to disaggregated business cycle dynamics," ULB Institutional Repository 2013/10147, ULB -- Universite Libre de Bruxelles.
  3. Francis X. Diebold & Robert S. Mariano, 1994. "Comparing Predictive Accuracy," NBER Technical Working Papers 0169, National Bureau of Economic Research, Inc.
  4. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
  5. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2004. "Similarities and convergence in G-7 cycles," Working Paper Series 0312, European Central Bank.
  6. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
  7. M. Hashem Pesaran, 2003. "Estimation and Inference in Large Heterogenous Panels with Cross Section Dependence," CESifo Working Paper Series 869, CESifo Group Munich.
  8. Chib, Siddhartha & Greenberg, Edward, 1995. "Hierarchical analysis of SUR models with extensions to correlated serial errors and time-varying parameter models," Journal of Econometrics, Elsevier, vol. 68(2), pages 339-360, August.
  9. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  10. Timothy Cogley & Thomas J. Sargent, 2003. "Drifts and volatilities: monetary policies and outcomes in the post WWII U.S," FRB Atlanta Working Paper 2003-25, Federal Reserve Bank of Atlanta.
  11. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  12. Michael Binder & Cheng Hsiao & M. Hashem Pesaran, 2000. "Estimation and Inference in Short Panel Vector Autoregressions with Unit Roots and Cointegration," Working Papers 0005, Banco de España;Working Papers Homepage.
  13. Kadiyala, K Rao & Karlsson, Sune, 1997. "Numerical Methods for Estimation and Inference in Bayesian VAR-Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 99-132, March-Apr.
  14. Fabio Canova & Matteo Ciccarelli, 2000. "Forecasting And Turning Point Predictions In A Bayesian Panel Var Model," Working Papers. Serie AD 2000-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  15. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  16. Tatiana Kirsanova, 2002. "Credibility of the Russian Stabilisation Programme in 1995-98," NIESR Discussion Papers 193, National Institute of Economic and Social Research.
  17. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1993. "Nonlinear Dynamic Structures," Econometrica, Econometric Society, vol. 61(4), pages 871-907, July.
  18. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February.
  19. Hsiao, C. & Pesaran, M. H. & Tahmiscioglu, A. K., 1998. "Bayes Estimation of Short-run Coefficients in Dynamic Panel Data Models," Cambridge Working Papers in Economics 9804, Faculty of Economics, University of Cambridge.
  20. Otrok, C. & Whiteman, C.H., 1996. "Bayesian Leading Indicators: Measuring and Predicting Economic Conditions in Iowa," Working Papers 96-14, University of Iowa, Department of Economics.
  21. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061546, June.
  22. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
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