DSGE-SVt: An Econometric Toolkit for High-Dimensional DSGE Models with SV and t Errors

Chib, Siddhartha; Shin, Minchul; Tan, Fei

doi:10.1007/s10614-021-10200-y

Cited by 4 publications

(3 citation statements)

References 34 publications

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“…Importantly, the added value of SVO also holds up over a longer sample outside the recent COVID-19 episode, similar to an SV model with t-distributed errors. 9 The remainder of this paper proceeds as follows: Section 2 introduces the SVO model and alternative specifications to handle outliers, and describes their estimation. Section 3 describes the data used.…”

Section: Introductionmentioning

confidence: 99%

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

Carriero

Clark

Marcellino

et al. 2024

Review of Economics and Statistics

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The COVID-19 pandemic has led to enormous data movements that strongly affect parameters and forecasts from standard Bayesian vector autoregressions (BVARs). To address these issues, we propose BVAR models with outlier-augmented stochastic volatility (SV) that combine transitory and persistent changes in volatility. The resulting density forecasts are much less sensitive to outliers in the data than standard BVARs. Predictive Bayes factors indicate that our outlier-augmented SV model provides the best fit for the pandemic period, as well as for earlier subsamples of high volatility. In historical forecasting, outlier-augmented SV schemes fare at least as well as a conventional SV model.

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Section: Introductionmentioning

confidence: 99%

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

Carriero

Clark

Marcellino

et al. 2024

Review of Economics and Statistics

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“…7 The prior mean of p j = 1/(4 • 12) implies about the same variance of o j,t in the SVO model as do our prior means of p j and d j in the SVO-t model for the combined outlier states o j,t • q j,t (see the supplementary online appendix). 8 The prior for Σ in the constant-variance model is uninformative; that is, we use an improper…”

Section: Discussionmentioning

confidence: 99%

“…The algorithm includes all of the same steps given in CCM (as corrected in Carriero, et al (2022)), except for necessary adjustments to account for the two alternative cases. For the constant-volatility model, an inverse-Wishart prior for Σ, with a (conditionally) conjugate inverse-Wishart updating step for the MCMC sampler, replaces the SV block of the model 8.…”

mentioning

confidence: 99%

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

et al. 2022

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Origins of monetary policy shifts: A New approach to regime switching in DSGE models

Chang

Maih

Tan

2021

Journal of Economic Dynamics and Control

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We examine monetary policy shifts by taking a new approach to regime switching in a small scale monetary DSGE model with threshold-type switching in the monetary policy rule. The policy response to inflation is allowed to switch endogenously between two regimes, hawkish and dovish, depending on whether a latent regime factor crosses a threshold level. Endogeneity stems from the historical impacts of structural shocks driving the economy on the regime factor. We quantify the endogenous feedback from each structural shock to the regime factor to understand the sources of the observed policy shifts. This new channel sheds new light on the interaction between policy changes and measured economic behavior. We develop a computationally efficient filtering algorithm for state-space models with time-varying transition probabilities that handles classical regression models as a special case. We apply this filter to estimate our DSGE model using the U.S. data and find strong evidence of endogeneity in the monetary policy shifts.

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DSGE-SVt: An Econometric Toolkit for High-Dimensional DSGE Models with SV and t Errors

Cited by 4 publications

References 34 publications

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

Addressing COVID-19 Outliers in BVARs with Stochastic Volatility

Origins of monetary policy shifts: A New approach to regime switching in DSGE models

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