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Large Bayesian VARs

  • Marta Bańbura

    (Université Libre de Bruxelles, ECARES)

This paper assesses the performance of Bayesian Vector Autoregression (BVAR) for models of different size. We consider standard specifications in the macroeconomic literature based on, respectively, three and eight variables and compare results with those obtained by larger models containing twenty or over one hundred conjunctural indicators. We first study forecasting accuracy and then perform a structural exercise focused on the effect of a monetary policy shock on the macroeconomy. Results show that BVARs estimated on the basis of hundred variables perform well in forecasting and are suitable for structural analysis.

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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 334.

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Date of creation: 2008
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Handle: RePEc:red:sed008:334
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