Reduced-rank time-varying vector autoregressions

Joris de Wind and Luca Gambetti

No 270, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: The standard time-varying VAR workhorse suffers from overparameterization, which is a serious problem as it limits the number of variables and lags that can be incorporated in the model. Read also: CPB Discussion Paper 271 'Time variation in the dynamic effects of unanticipated changes in tax policy'. As a solution for the overparameterization problem, we propose a new, more parsimonious time-varying VAR model setup with which we can reliably estimate larger models including more variables and/or more lags than was possible until now. The new model setup implies cross-equation restrictions on the time variation that are empirically supported, theoretically appealing, and make the Bayesian estimation procedure much faster.

JEL-codes: C52 C53 E37 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.cpb.nl/sites/default/files/publicaties ... -autoregressions.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:270

Access Statistics for this paper

More papers in CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis Contact information at EDIRC.
Bibliographic data for series maintained by ().