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Endogenous Time Variation in Vector Autoregressions

Danilo Leiva-Leon () and Luis Uzeda ()

Staff Working Papers from Bank of Canada

Abstract: We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence — contemporaneously and with a lag — the dynamics of the intercept and autoregressive coefficients in these models. An estimation algorithm and a parametrization conducive to model comparison are also provided. We apply our framework to the US economy. Scenario analysis suggests that the effects of monetary policy on economic activity are larger and more persistent in the proposed models than in an otherwise standard TVP-VAR. Our results also indicate that costpush shocks play an important role in understanding historical changes in inflation persistence.

Keywords: Econometric and statistical methods; Inflation and prices; Transmission of monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E52 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2020-05
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:20-16

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