VAR Models with Non-Gaussian Shocks

Ching-Wai (Jeremy) Chiu, Haroon Mumtaz and Gabor Pinter

No 1609, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: We introduce a Bayesian VAR model with non-Gaussian disturbances that are modelled with a finite mixture of normal distributions. Importantly, we allow for regime switching among the different components of the mixture of normals. Our model is highly flexible and can capture distributions that are fat-tailed, skewed and even multimodal. We show that our model can generate large out-of-sample forecast gains relative to standard forecasting models, especially during tranquil periods. Our model forecasts are also competitive with those generated by the conventional VAR model with stochastic volatility.

JEL-codes: C11 C32 C52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-02
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-ore
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: VAR models with non-Gaussian shocks (2016)
Working Paper: VAR Models with Non-Gaussian Shocks (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1609

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