EconPapers    
Economics at your fingertips  
 

Have standard VARs remained stable since the crisis?

Knut Are Aastveit (), Andrea Carriero (), Todd Clark and Massimiliano Marcellino

No 2014/13, Working Paper from Norges Bank

Abstract: Small or medium-scale VARs are commonly used in applied macroeconomics for forecasting and evaluating the shock transmission mechanism. This requires the VAR parameters to be stable over the evaluation and forecast sample, or to explicitly consider parameter time variation. The earlier literature focused on whether there were sizable parameter changes in the early 1980s, in either the conditional mean or variance parameters, and in the subsequent period till the beginning of the new century. In this paper we conduct a similar analysis but focus on the e ects of the recent crisis. Using a range of techniques, we provide substantial evidence against parameter stability. The evolution of the unemployment rate seems particularly different relative to its past behavior. We then discuss and evaluate alternative methods to handle parameter instability in a forecasting context. While none of the methods clearly emerges as best, some techniques turn out to be useful to improve the forecasting performance.

Keywords: Bayesian VAR; Forecasting; Time-varying parameters; Stochastic volatility (search for similar items in EconPapers)
JEL-codes: E17 C11 C33 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-for, nep-mac and nep-ore
Date: 2014-09-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.norges-bank.no/en/Published/Papers/Working-Papers/2014/13/

Related works:
Journal Article: Have Standard VARS Remained Stable Since the Crisis? (2017) Downloads
Working Paper: Have Standard VARs Remained Stable Since the Crisis? (2016) Downloads
Working Paper: Have Standard VARs Remained Stable since the Crisis? (2014) 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:bno:worpap:2014_13

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-06-23
Handle: RePEc:bno:worpap:2014_13