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Estimating Multi-country VAR models

  • Fabio Canova
  • Matteo Ciccarelli

This paper presents a method 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 a MCMC routine. The transmission of certain shocks across countries is analyzed.

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Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 7_2007.

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Date of creation: 01 Apr 2007
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Handle: RePEc:prt:dpaper:7_2007
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  20. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061546.
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  31. 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.
  32. 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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