Large Vector Autoregressions with Asymmetric Priors
Todd Clark and
No 759, Working Papers from Queen Mary University of London, School of Economics and Finance
We propose a new algorithm which allows easy estimation of Vector Autoregressions (VARs) featuring asymmetric priors and time varying volatilities, even when the cross sectional dimension of the system N is particularly large. The algorithm is based on a simple triangularisation which allows to simulate the conditional mean coefficients of the VAR by drawing them equation by equation. This strategy reduces the computational complexity by a factor of N 2 with respect to the existing algorithms routinely used in the literature and by practitioners. Importantly, this new algorithm can be easily obtained by modifying just one of the steps of the existing algorithms. We illustrate the benefits of the algorithm with numerical and empirical applications.
Keywords: Bayesian VARs; Stochastic volatility; Large datasets; Forecasting; Impulse response functions (search for similar items in EconPapers)
JEL-codes: C11 C13 C33 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-ecm, nep-ets and nep-ore
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Working Paper: Large Vector Autoregressions with Asymmetric Priors (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:wp759
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