EconPapers    
Economics at your fingertips  
 

Bayesian VARs: Specification Choices and Forecast Accuracy

Andrea Carriero (), Todd Clark and Massimiliano Marcellino

Journal of Applied Econometrics, 2015, vol. 30, issue 1, 46-73

Abstract: In this paper we discuss how the point and density forecasting performance of Bayesian vector autoregressions (BVARs) is affected by a number of specification choices. We adopt as a benchmark a common specification in the literature, a BVAR with variables entering in levels and a prior modeled along the lines of Sims and Zha (International Economic Review 1998; 39 : 949–968). We then consider optimal choice of the tightness, of the lag length and of both; evaluate the relative merits of modeling in levels or growth rates; compare alternative approaches to h‐step‐ahead forecasting (direct, iterated and pseudo‐iterated); discuss the treatment of the error variance and of cross‐variable shrinkage; and assess rolling versus recursive estimation. Finally, we analyze the robustness of the results to the VAR size and composition (using also data for France, Canada and the UK, while the main analysis is for the USA). We obtain a large set of empirical results, but the overall message is that we find very small losses (and sometimes even gains) from the adoption of specification choices that make BVAR modeling quick and easy, in particular for point forecasting. This finding could therefore further enhance the diffusion of the BVAR as an econometric tool for a vast range of applications. Copyright © 2013 John Wiley & Sons, Ltd.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (44) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/

Related works:
Working Paper: Bayesian VARs: Specification Choices and Forecast Accuracy (2011) Downloads
Working Paper: Bayesian VARs: specification choices and forecast accuracy (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:30:y:2015:i:1:p:46-73

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-06-13
Handle: RePEc:wly:japmet:v:30:y:2015:i:1:p:46-73