Gaussian and Student's $t$ mixture vector autoregressive model with application to the effects of the Euro area monetary policy shock

Savi Virolainen

Papers from arXiv.org

Abstract: A new mixture vector autoregressive model based on Gaussian and Student's $t$ distributions is introduced. As its mixture components, our model incorporates conditionally homoskedastic linear Gaussian vector autoregressions and conditionally heteroskedastic linear Student's $t$ vector autoregressions. For a $p$th order model, the mixing weights depend on the full distribution of the preceding $p$ observations, which leads to attractive practical and theoretical properties such as ergodicity and full knowledge of the stationary distribution of $p+1$ consecutive observations. A structural version of the model with statistically identified shocks is also proposed. The empirical application studies the effects of the Euro area monetary policy shock. We fit a two-regime model to the data and find the effects, particularly on inflation, stronger in the regime that mainly prevails before the Financial crisis than in the regime that mainly dominates after it. The introduced methods are implemented in the accompanying R package gmvarkit.

Date: 2021-09, Revised 2024-06
New Economics Papers: this item is included in nep-cwa, nep-ecm, nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2109.13648 Latest version (application/pdf)

Related works:
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:arx:papers:2109.13648

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().