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Large mixed-frequency VARs with a parsimonious time-varying parameter structure

Thomas Götz and Klemens Hauzenberger

No 40/2018, Discussion Papers from Deutsche Bundesbank

Abstract: To simultaneously consider mixed-frequency time series, their joint dynamics, and possible structural changes, we introduce a time-varying parameter mixed-frequency VAR. To keep our approach from becoming too complex, we implement time variation parsimoniously: only the intercepts and a common factor in the error variances vary over time. We can therefore estimate moderately large systems in a reasonable amount of time, which makes our modifications appealing for practical use. For eleven U.S. variables, we examine the performance of our model and compare the results to the time-constant MF-VAR of Schorfheide and Song (2015). Our results demonstrate the feasibility and usefulness of our method.

Keywords: Mixed Frequencies; Time-Varying Intercepts; Common Stochastic Volatility; Bayesian VAR; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 C51 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2018
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