Vector autoregressions (VARs) are flexible time series models that can capture complex dynamic interrelationships among macroeconomic variables. However, their dense parameterization leads to unstable inference and inaccurate out-of-sample forecasts, particularly for models with many variables....

The prominent role of monetary policy in the U.S. interwar depression has been conventional wisdom since Friedman and Schwartz [1963]. This paper presents evidence on both the surprise and the systematic components of monetary policy between 1929 and 1933. Doubts surrounding GDP estimates for...

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model that accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for...

The paper develops a Small Open Economy New Keynesian DSGE-VAR (SOENKDSGE-VAR) model of the South African economy, characterised by incomplete pass-through of exchange rate changes, external habit formation, partial indexation of domestic prices and wages to past inflation, and staggered price...

We propose new forecast combination schemes for predicting turning points of business cycles. The proposed combination schemes are based on the forecasting performances of a given set of models with the aim to provide better turning point predictions. In particular, we consider predictions...

We estimate a small DSGE model by full information Bayesian techniques on the basis of Israeli data from 1995 to 2006. The model was first developed and estimated by means of classical GMM in Argov and Elkayam (2010), and since then it has been used at the Bank of Israel for monetary policy...

We propose a Bayesian combination approach for multivariate predictive densities which relies upon a distributional state space representation of the combination weights. Several specifications of multivariate time-varying weights are introduced with a particular focus on weight dynamics driven...

We build a model of the euro area incorporating financial market frictions at the level of firms and households. Entrepreneurs borrow from financial intermediaries in order to purchase business capital, in the spirit of the “financial accelerator” literature. We also introduce two types of...

In this paper, we develop methods for estimation and forecasting in large time-varying parameter vector autoregressive models (TVP-VARs). To overcome computational constraints, we draw on ideas from the dynamic model averaging literature which achieve reductions in the computational burden...