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Structural Panel Bayesian VAR Model to Deal with Model Misspecification and Unobserved Heterogeneity Problems

Antonio Pacifico ()
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Antonio Pacifico: Department of Political Sciences, LUISS Guido Carli University and CEFOP-LUISS, 00197 Rome, Italy

Econometrics, 2019, vol. 7, issue 1, 1-24

Abstract: This paper provides an overview of a time-varying Structural Panel Bayesian Vector Autoregression model that deals with model misspecification and unobserved heterogeneity problems in applied macroeconomic analyses when studying time-varying relationships and dynamic interdependencies among countries and variables. I discuss what its distinctive features are, what it is used for, and how it can be analytically derived. I also describe how it is estimated and how structural spillovers and shock identification are performed. The model is empirically applied to a set of developed European economies to illustrate the functioning and the ability of the model. The paper also discusses more recent studies that have used multivariate dynamic macro-panels to evaluate idiosyncratic business cycles, policy-making, and spillover effects among different sectors and countries.

Keywords: panel VAR; Bayesian inference; structural spillovers; hierarchical priors; MCMC implementations (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2019
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