Large Bayesian VARs for Binary and Censored Variables

Joshua Chan and Michael Pfarrhofer

Papers from arXiv.org

Abstract: We extend the standard VAR to jointly model the dynamics of binary, censored and continuous variables, and develop an efficient estimation approach that scales well to high-dimensional settings. In an out-of-sample forecasting exercise, we show that the proposed VARs forecast recessions and short-term interest rates well. We demonstrate the utility of the proposed framework using a wide rage of empirical applications, including conditional forecasting and a structural analysis that examines the dynamic effects of a financial shock on recession probabilities.

Date: 2025-06
New Economics Papers: this item is included in nep-ets and nep-for
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