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VAR Forecasting Using Bayesian Variable Selection

  • Dimitris Korobilis

    (Université Catholique de Louvain; The Rimini Centre for Economic Analysis (RCEA))

This paper develops methods for automatic selection of variables in Bayesian vector autoregressions (VARs) using the Gibbs sampler. In particular, I provide computationally efficient algorithms for stochastic variable selection in generic linear and nonlinear models, as well as models of large dimensions. The performance of the proposed variable selection method is assessed in forecasting three major macroeconomic time series of the UK economy. Data-based restrictions of VAR coefficients can help improve upon their unrestricted counterparts in forecasting, and in many cases they compare favorably to shrinkage estimators.

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File URL: http://www.rcfea.org/RePEc/pdf/wp51_10.pdf
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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 51_10.

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Date of creation: Jan 2010
Date of revision: Apr 2011
Handle: RePEc:rim:rimwps:51_10
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