Panel Index VAR Models: Specification, Estimation, Testing and Leading Indicators
Universitat Pompeu Fabra - Department of Economics and Business (DEB); University of Southampton - Division of Economics; Centre for Economic Policy Research (CEPR)
European Central Bank (ECB)
CEPR Discussion Paper No. 4033
This Paper proposes a method to conduct inference in panel VAR models with cross-unit interdependencies and time variations in the coefficients. The set-up used is Bayesian, and Markov Chain Monte Carlo (MCMC) methods are used to estimate the posterior distribution of the features of interest. The model is re-parameterized to resemble an observable index model and specification searches are discussed. The approach can be used to construct multi-unit forecasts, leading indicators and to conduct policy analysis in multi-unit set-ups. The methodology is employed to construct leading indicators for inflation and GDP growth in the euro area.
Number of Pages in PDF File: 28
Keywords: Panel VAR, Bayesian methods, leading indicators, Markov Chain Monte Carlo methods
JEL Classification: C30, E50working papers series
Date posted: October 15, 2003
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