EconPapers    
Economics at your fingertips  
 

The Time-Varying Multivariate Autoregressive Index Model

Gianluca Cubadda, Stefano Grassi () and Barbara Guardabascio ()
Additional contact information
Stefano Grassi: DEF, University of Rome "Tor Vergata", http://www.ceistorvergata.it
Barbara Guardabascio: University of Perugia

No 571, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: Many economic variables are characterized by changes in their conditional mean and volatility, and time-varying Vector Autoregressive Models are often used to handle such complexity. Unfortunately, as the number of series grows, they present increasing estimation and interpretation issues. This paper tries to address this problem by proposing a Multivariate Autoregressive Index model that features time-varying mean and volatility. Technically, we develop a new estimation methodology that mixes switching algorithms with the forgetting factors strategy of Koop and Korobilis (2012). This substantially reduces the computational burden and allows one to select or weigh the number of common components, and other data features, in real-time without additional computational costs. Using US macroeconomic data, we provide a forecast exercise that shows the feasibility and usefulness of this model.

Keywords: Large Vector Autoregressive Models; Multivariate Autoregressive Index Models; Time-Varying Parameter Models; Bayesian Vector Autoregressive Models. (search for similar items in EconPapers)
Pages: 52 pages
Date: 2024-01-10, Revised 2024-01-10
New Economics Papers: this item is included in nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ceistorvergata.it/RePEc/rpaper/RP571.pdf Main text (application/pdf)

Related works:
Journal Article: The time-varying Multivariate Autoregressive Index model (2025) Downloads
Working Paper: The Time-Varying Multivariate Autoregressive Index Model (2022) Downloads
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:rtv:ceisrp:571

Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
https://ceistorvergata.it

Access Statistics for this paper

More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().

 
Page updated 2025-04-01
Handle: RePEc:rtv:ceisrp:571