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Changing impact of shocks: a time-varying proxy SVAR approach

Author

Listed:
  • Haroon Mumtaz

    (Queen Mary University of London)

  • Katerina Petrova

    (University of St. Andrews)

Abstract

In this paper we extend the Bayesian Proxy VAR to incorporate time variation in the parameters. A Gibbs sampling algorithm is provided to approximate the posterior distributions of the model's parameters. Using the proposed algorithm, we estimate the time-varying effects of taxation shocks in the US and show that there is limited evidence for a structural change in the tax multiplier.

Suggested Citation

  • Haroon Mumtaz & Katerina Petrova, 2018. "Changing impact of shocks: a time-varying proxy SVAR approach," Working Papers 875, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:875
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2018/wp875.pdf
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    References listed on IDEAS

    as
    1. Juan F. Rubio-Ramírez & Daniel F. Waggoner & Tao Zha, 2010. "Structural Vector Autoregressions: Theory of Identification and Algorithms for Inference," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 665-696.
    2. Karel Mertens & Morten O. Ravn, 2012. "Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 145-181, May.
    3. Mertens, Karel & Ravn, Morten O., 2014. "A reconciliation of SVAR and narrative estimates of tax multipliers," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 1-19.
    4. Christophe Andrieu & Arnaud Doucet & Roman Holenstein, 2010. "Particle Markov chain Monte Carlo methods," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 72(3), pages 269-342, June.
    5. Timothy Cogley & Thomas J. Sargent, 2005. "Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 262-302, April.
    6. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
    7. Paul, Pascal, 2017. "The Time-Varying Effect of Monetary Policy on Asset Prices," Working Paper Series 2017-9, Federal Reserve Bank of San Francisco, revised 02 Jan 2018.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Time-Varying parameters; Stochastic volatility; Proxy VAR; tax shocks;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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