EconPapers    
Economics at your fingertips  
 

Alternatives to large VAR, VARMA and multivariate stochastic volatility models

Mike Tsionas

No 217, Working Papers from Bank of Greece

Abstract: In this paper, our proposal is to combine univariate ARMA models to produce a variant of the VARMA model that is much more easily implementable and does not involve certain complications. The original model is reduced to a series of univariate problems and a copula – like term (a mixture-of-normals densities) is introduced to handle dependence. Since the univariate problems are easy to handle by MCMC or other techniques, computations can be parallelized easily, and only univariate distribution functions are needed, which are quite often available in closed form. The results from parallel MCMC or other posterior simulators can then be taken together and use simple sampling - resampling to obtain a draw from the exact posterior which includes the copula - like term. We avoid optimization of the parameters entering the copula mixture form as its parameters are optimized only once before MCMC begins. We apply the new techniques in three types of challenging problems. Large time-varying parameter vector autoregressions (TVP-VAR) with nearly 100 macroeconomic variables, multivariate ARMA models with 25 macroeconomic variables and multivariate stochastic volatility models with 100 stock returns. Finally, we perform impulse response analysis in the data of Giannone, Lenza, and Primiceri (2015) and compare, as they proposed with results from a dynamic stochastic general equilibrium model.

Keywords: Vector Autoregressive Moving Average models; Multivariate Stochastic Volatility models; Copula models; Bayesian analysis (search for similar items in EconPapers)
JEL-codes: C11 C13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
Date: 2016-12
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper2016216.pdf Full Text (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:bog:wpaper:217

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Christina Tsochatzi ().

 
Page updated 2019-04-22
Handle: RePEc:bog:wpaper:217