Forecasting and Turning Point Predictions in a Bayesian Panel VAR Model

UPF Economics and Business Working Paper No. 443

31 Pages Posted: 22 Nov 2000

See all articles by Fabio Canova

Fabio Canova

BI Norwegian Business School

Matteo Ciccarelli

European Central Bank (ECB)

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Abstract

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model which accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for a particular type of diffuse, for Minnesota-type and for hierarchical priors. Formulas for multistep, multiunit point and average forecasts are provided. An application to the problem of forecasting the growth rate of output and of predicting turning points in the G-7 illustrates the approach. A comparison with alternative forecasting methods is also provided.

Keywords: Forecasting, Turning Points, Bayesian Methods, Panel VAR, Markov Chains Monte Carlo Methods.

JEL Classification: C11, C15, E32, E37

Suggested Citation

Canova, Fabio and Ciccarelli, Matteo, Forecasting and Turning Point Predictions in a Bayesian Panel VAR Model. UPF Economics and Business Working Paper No. 443, Available at SSRN: https://ssrn.com/abstract=224579 or http://dx.doi.org/10.2139/ssrn.224579

Fabio Canova (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Matteo Ciccarelli

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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