Have Standard VARS Remained Stable Since the Crisis?

Aastveit, Knut Are; Carriero, Andrea; Clark, Todd E.; Marcellino, Massimiliano

doi:10.1002/jae.2555

Cited by 52 publications

(32 citation statements)

References 68 publications

(74 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…and covariance matrix in out-of-sample forecasting, our results bear some resemblance to those of Aastveit et al (2017).…”

Section: Out-of-sample Forecastssupporting

confidence: 73%

“…29 Finding that the model with time-varying parameters and stochastic volatility has difficulties outperforming the model with constant parameters Footnote 27 continued was that a model with drifting parameters and stochastic volatility could generate improvements in forecast accuracy over a simple autoregressive benchmark (with constant parameters and variance) but that it was difficult to beat a VAR (with constant parameters and covariance matrix) estimated on a rolling sample. Aastveit et al (2017) estimated models of various dimensions using US data but focused on the evaluation of the forecast accuracy with respect to GDP growth, unemployment rate and inflation. They found that the model with time-varying parameters and stochastic volatility had difficulties outperforming a model with constant parameters and covariance matrix.…”

Section: Out-of-sample Forecastsmentioning

confidence: 99%

See 1 more Smart Citation

A note on the stability of the Swedish Phillips curve

Karlsson

Österholm

2019

Empir Econ

View full text Add to dashboard Cite

We use Bayesian techniques to estimate bivariate VAR models for Swedish unemployment rate and inflation. Employing quarterly data from 1995Q1 to 2018Q3 and new tools for model selection, we compare models with time-varying parameters and/or stochastic volatility to specifications with constant parameters and/or covariance matrix. The evidence in favour of a stable dynamic relationship between the unemployment rate and inflation is mixed. Model selection based on marginal likelihood calculations indicates that the relation is time varying, whereas the use of the deviance information criterion suggests that it is constant over time; we do, however, note consistent evidence in favour of stochastic volatility. An out-of-sample forecast exercise is also conducted, but similarly provides mixed evidence regarding which model to favour. Importantly though, even if time-varying parameters are allowed for, our results do not suggest that the Phillips curve has been flatter in more recent years. This finding thereby questions the explanation that a flatter Phillips curve is the cause of the low inflation that Sweden has experienced in recent year. Keywords Inflation • Unemployment • Time-varying parameters • Stochastic volatility JEL Classification C11 • C32 • E32 We are grateful to Mikael Apel, Paola Di Casola, Henry Ohlsson, two anonymous referees, the editor, the associate editor and seminar participants at the Ministry of Finance (in Sweden), the 6th Swedish National Conference in Economics and the 10th Nordic Econometric Meeting for valuable comments. Rafael Barros De Rezende kindly provided data on the shadow rate and Joshua Chan generously shared Matlab code.

show abstract

“…and covariance matrix in out-of-sample forecasting, our results bear some resemblance to those of Aastveit et al (2017).…”

Section: Out-of-sample Forecastssupporting

confidence: 73%

Section: Out-of-sample Forecastsmentioning

confidence: 99%

A note on the stability of the Swedish Phillips curve

Karlsson

Österholm

2019

Empir Econ

View full text Add to dashboard Cite

show abstract

“…This shift in the parameters' signal we find after the crisis is also consistent with recent empirical evidence in VAR models and evaluation of shock transmission (Aastveit, Carriero, Clark, & Marcellino, ).…”

supporting

confidence: 91%

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

2018

View full text Add to dashboard Cite

Although there are several direct and indirect theoretical channels through which foreign capital flows may affect domestic investment, empirical evidence remains inconclusive. In this paper, we employ a VARX framework to assess the impact of equity foreign portfolio investment (EFPI) on domestic investment growth, employing monthly series for the Brazilian economy. Our results suggest that EFPI played a nonnegligible role in explaining aggregate investment fluctuations, but only before the 2008 global financial crisis. After the crisis, a period marked first by a shift in economic policy in 2008–2009, with substantial increases in government intervention, followed by deterioration in the institutional outlook and political stability in 2014–2015, mostly against the backdrop of the Petrobras corruption scandal, unexpected shocks to EFPI no longer led any real effects on investment growth. Although, in general, our results vouch for beneficial effects of equity capital flows on investment, this virtuous relationship is likely disturbed by interventionist policies and political unrest.

show abstract

“…Banbura, Giannone, and Reichlin (2010) show that large VARs containing more than 100 variables can work effectively, a finding that has contributed to a resurgence in the use of VARs in forecasting and policy analysis by both central banks and private forecasters. 1 In this paper, we propose a technique to adjust the medium-term and long-horizon forecasts from a VAR toward plausible values proposed by judgmental forecasters. Specifically, we utilize the technique of relative entropy to alter the medium-term to longhorizon VAR forecast to match that of the real-time survey long-horizon forecast.…”

Section: Introductionmentioning

confidence: 99%

Combining survey long-run forecasts and nowcasts with BVAR forecasts using relative entropy

Tallman

Zaman

2020

International Journal of Forecasting

View full text Add to dashboard Cite

This paper constructs hybrid forecasts that combine both short-and longterm conditioning information from external surveys with forecasts from a standard fi xed-coeffi cient vector autoregression (VAR) model. Specifi cally, we use relative entropy to tilt one-step ahead and long-horizon VAR forecasts to match the nowcast and long-horizon forecast from the Survey of Professional Forecasters. The results indicate meaningful gains in multi-horizon forecast accuracy relative to model forecasts that do not incorporate long-term survey conditions. The accuracy gains are achieved for a range of variables, including those that are not directly tilted but are affected through spillover effects from tilted variables. The forecast accuracy gains for infl ation are substantial, statistically signifi cant, and are competitive with the forecast accuracy from both time-varying VARs and univariate benchmarks. We view our proposal as an indirect approach to accommodating structural change and moving end points.

show abstract

Have Standard VARS Remained Stable Since the Crisis?

Cited by 52 publications

References 68 publications

A note on the stability of the Swedish Phillips curve

A note on the stability of the Swedish Phillips curve

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

Combining survey long-run forecasts and nowcasts with BVAR forecasts using relative entropy

Contact Info

Product

Resources

About