VAR Models with Fat Tails and Dynamic Asymmetry

Tamas Kiss, Stepan Mazur, Hoang Nguyen and Pär Österholm

No 2024:8, Working Papers from Örebro University, School of Business

Abstract: In this paper, we extend the standard Gaussian stochastic-volatility Bayesian VAR by employing the generalized hyperbolic skew Student’s t distribution for the innovations. Allowing the skewness parameter to vary over time, our specification permits flexible modelling of innovations in terms of both fat tails and – potentially dynamic – asymmetry. In an empirical application using US data on industrial production, consumer prices and economic policy uncertainty, we find support – although to a moderate extent – for time-varying skewness. In addition, we find that shocks to economic policy uncertainty have a negative effect on both industrial production growth and CPI inflation.

Keywords: Bayesian VAR; Generalized hyperbolic skew Students’s t distribution; Stochastic volatility; Economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: C11 C32 C52 E44 E47 G17 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-10-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-inv
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.oru.se/globalassets/oru-sv/institution ... rs2024/wp-8-2024.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:hhs:oruesi:2024_008

Access Statistics for this paper

More papers in Working Papers from Örebro University, School of Business Örebro University School of Business, SE - 701 82 ÖREBRO, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by ().