Time-Varying Effects of External Shocks on Macroeconomic Fluctuations in Peru: An Empirical Application using TVP-VAR- SV Models

Junior A. Ojeda Cunya and Gabriel Rodríguez
Additional contact information
Junior A. Ojeda Cunya: Pontificia Universidad Católica del Perú.

No 2022-507, Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú

Abstract: This study uses a family of VAR models with time-varying coefficients and stochastic volatility (TVP-VAR-SV) to analyze the impact of external shocks on output growth and inflation in Peru in 1992Q1-2017Q1. The statistical relevance of the models is assessed using the deviance information criterion (DIC) and the marginal log-likelihood calculated using the cross-entropy (CE) method. The results show that: (i) it is more relevant to introduce SV than TVP; i.e., the best fitting model admits only varying intercepts and SV; and TVP-VAR and CVAR are the least performing models; (ii) the models impulse response functions indicate that the impacts from external shocks are different under high inflation, economic crisis, and monetary policy change, with a greater impact in episodes of high uncertainty; (iii) the impact and importance of external shocks has increased over time; and (iv) the results are robust to changes in the priors, the lag structure, order of the variables, the external variable, and the variable for domestic economic activity. JEL Classification-JE: C11, C32, E32, F41, F62.

Keywords: Macroeconomic Fluctuations; External Shocks; Autoregressive Vectors with Time- Varying Parameters; Stochastic Volatility; Bayesian Estimation and Comparison; Peruvian Eco- nomy. (search for similar items in EconPapers)
Pages: 42
Date: 2022
New Economics Papers: this item is included in nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published

Downloads: (external link)
http://doi.org/10.18800/2079-8474.0507 (application/pdf)

Related works:
Journal Article: Time-Varying Effects of External Shocks on Macroeconomic Fluctuations in Peru: An Empirical Application using TVP-VAR-SV Models (2024)
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:pcp:pucwps:wp00507

Access Statistics for this paper

More papers in Documentos de Trabajo / Working Papers from Departamento de Economía - Pontificia Universidad Católica del Perú Av. Universitaria 1801, San Miguel, Lima, Perú. Contact information at EDIRC.
Bibliographic data for series maintained by ().