Bayesian Vector Autoregressions with Non-Gaussian Shocks

Ching-Wai (Jeremy) Chiu, Haroon Mumtaz and Gabor Pinter
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Ching-Wai (Jeremy) Chiu: Bank of England

No 5, CReMFi Discussion Papers from CReMFi, School of Economics and Finance, QMUL

Abstract: This paper proposes a Bayesian Vector Autoregression where the orthogonalised shocks are assumed to be non-Gaussian. A Gibbs sampling algorithm is provided to approximate the poste-rior distribution of the model parameters. An application to a model of the yield curve suggests that there is ample evidence against the assumption of normal shocks. The proposed model provides notable improvements both in terms of in-sample �t and out of sample forecasting.

Keywords: Bayesian VAR; Non-Gaussian shocks; Density Forecasting (search for similar items in EconPapers)
JEL-codes: C11 C32 C52 (search for similar items in EconPapers)
Date: 2016-07
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Persistent link: https://EconPapers.repec.org/RePEc:qmm:wpaper:5

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