A Class of Time-Varying Vector Moving Average (infinity) Models

Yayi Yan (), Jiti Gao and Bin Peng ()

No 39/20, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: Multivariate time series analyses are widely encountered in practical studies, e.g., modelling policy transmission mechanism and measuring connectedness between economic agents. To better capture the dynamics, this paper proposes a class of multivariate dynamic models with time-varying coefficients, which have a general time-varying vector moving average (VMA) representation, and nest, for instance, time-varying vector autoregression (VAR), time-varying vector autoregression moving-average (VARMA), and so forth as special cases. The paper then develops a unified estimation method for the unknown quantities before an asymptotic theory for the proposed estimators is established. In the empirical study, we investigate the transmission mechanism of monetary policy using U.S. data, and uncover a fall in the volatilities of exogenous shocks. In addition, we find that (i) monetary policy shocks have less influence on inflation before and during the so-called Great Moderation, (ii) inflation is more anchored recently, and (iii) the long-run level of inflation is below, but quite close to the Federal Reserve's target of two percent after the beginning of the Great Moderation period.

Keywords: multivariate time series model; nonparametric kernel estimation; trending stationarity (search for similar items in EconPapers)
Pages: 61
Date: 2020
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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