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Macroeconomic forecasting and structural changes in steady states

Dimitrios Louzis ()

No 204, Working Papers from Bank of Greece

Abstract: This article proposes methods for estimating a Bayesian vector autoregression (VAR) model with an informative steady state prior which also accounts for possible structural changes in the long-term trend of the macroeconomic variables. I show that, overall, the proposed time-varying steady state VAR model can lead to superior point and density macroeconomic forecasting compared to constant steady state VAR specifications.

Keywords: Steady states; time-varying parameters; macroeconomic forecasting (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-for
Date: 2016-03
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