 Using VARs and TVP-VARs with Many Macroeconomic VariablesCentral European Journal of Economic Modelling and Econometrics, 2012, vol. 4, issue 3, 143-167 Abstract: This paper discusses the challenges faced by the empirical macroeconomist and methods for surmounting them. These challenges arise due to the fact that macroeconometric models potentially include a large number of variables and allow for time variation in parameters. These considerations lead to models which have a large number of parameters to estimate relative to the number of observations. A wide range of approaches are surveyed which aim to overcome the resulting problems. We stress the related themes of prior shrinkage, model averaging and model selection. Subsequently, we consider a particular modelling approach in detail. This involves the use of dynamic model selection methods with large TVP-VARs. A forecasting exercise involving a large US macroeconomic data set illustrates the practicality and empirical success of our approach. Keywords: Bayesian VAR; forecasting; time-varying coefficients; state-space model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:4:y:2012:i:3:p:143-167 Access Statistics for this article More articles in Central European Journal of Economic Modelling and Econometrics from Central European Journal of Economic Modelling and Econometrics |
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