A Large Bayesian VAR of the U.S. Economy

Richard Crump, Stefano Eusepi, Domenico Giannone, Eric Qian and Argia Sbordone
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Stefano Eusepi: Brown University
Eric Qian: Princeton University
Argia Sbordone: Federal Reserve Bank of New York

International Journal of Central Banking, 2025, vol. 21, issue 2, 351-409

Abstract: We model the U.S. macroeconomic and financial sectors using a formal and unified econometric model. Through shrinkage, our Bayesian VAR provides a flexible framework for modeling the dynamics of 31 variables, many of which are tracked by the Federal Reserve. We show how the model can be used for understanding key features of the data, constructing counterfactual scenarios, and evaluating the macroeconomic environment both retrospectively and prospectively. Considering its breadth and versatility for policy applications, our modeling approach gives a reliable, reduced-form alternative to structural models.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2025:q:2:a:8

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