Gibbs Samplers for VARMA and Its Extensions

Joshua Chan and Eric Eisenstat

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: Empirical work in macroeconometrics has mostly restricted to using VARs, even though there are strong theoretical reasons to consider general VARMAs. This is perhaps because estimation of VARMAs is perceived to be challenging. In this article, we develop a Gibbs sampler for the basic VARMA, and demonstrate how it can be extended to models with stochastic volatility and time-varying parameters. We illustrate the methodology through a macroeconomic forecasting exercise. We show that VARMAs produce better density forecasts than VARs, particularly for short forecast horizons.

JEL-codes: C11 C32 C53 (search for similar items in EconPapers)
Pages: 22 Pages
Date: 2013-02
New Economics Papers: this item is included in nep-cwa, nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2013-604

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