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Forecasting and turning point predictions in a Bayesian panel VAR model

  • Fabio Canova
  • Matteo Ciccarelli

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model which accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for a particular type of diffuse, for Minnesota-type and for hierarchical priors. Formulas for multistep, multiunit point and average forecasts are provided. An application to the problem of forecasting the growth rate of output and of predicting turning points in the G-7 illustrates the approach. A comparison with alternative forecasting methods is also provided.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 443.

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Date of creation: Oct 1999
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Handle: RePEc:upf:upfgen:443
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  8. James H. Stock & Mark W. Watson, 1993. "A Procedure for Predicting Recessions with Leading Indicators: Econometric Issues and Recent Experience," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 95-156 National Bureau of Economic Research, Inc.
  9. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
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  11. Michael Binder & Cheng Hsiao & M. Hashem Pesaran, 2000. "Estimation and Inference In Short Panel Vector Autoregressions with Unit Roots And Cointegration," CESifo Working Paper Series 374, CESifo Group Munich.
  12. repec:cup:etheor:v:12:y:1996:i:3:p:409-31 is not listed on IDEAS
  13. Gerlach, Stefan & Smets, Frank, 1995. "The Monetary Transmission Mechanism: Evidence from the G-7 Countries," CEPR Discussion Papers 1219, C.E.P.R. Discussion Papers.
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  17. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
  18. Canova, Fabio & Ciccarelli, Matteo, 2004. "Forecasting and turning point predictions in a Bayesian panel VAR model," Journal of Econometrics, Elsevier, vol. 120(2), pages 327-359, June.
  19. Daniel F. Waggoner & Tao Zha, 1998. "Conditional forecasts in dynamic multivariate models," FRB Atlanta Working Paper 98-22, Federal Reserve Bank of Atlanta.
  20. Fabio Canova & Albert Marcet, 1995. "The poor stay poor: Non-convergence across countries and regions," Economics Working Papers 137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
  21. 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.
  22. 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.
  23. Zellner, Arnold & Hong, Chansik & Min, Chung-ki, 1991. "Forecasting turning points in international output growth rates using Bayesian exponentially weighted autoregression, time-varying parameter, and pooling techniques," Journal of Econometrics, Elsevier, vol. 49(1-2), pages 275-304.
  24. Koop, G, 1992. "Aggregate Shocks and Macroeconomic Fluctuations: A Bayesian Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(4), pages 395-411, Oct.-Dec..
  25. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  26. Garcia-Ferrer, Antonio, et al, 1987. "Macroeconomic Forecasting Using Pooled International Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(1), pages 53-67, January.
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