I develop a toolbox to analyze the properties of multivariate Markov-switching models. I first derive analytical formulas for the evolution of first and second moments, taking into account the possibility of regime changes. The formulas are then used to characterize the evolution of expectations...

This paper contributes to the debate on the decoupling of emerging economies (EEs) from advanced economies (AEs), by measuring how the resilience of EEs to external shocks (i.e. shocks spreading from AEs) has changed over time and whether EEs are relatively more vulnerable to real or financial...

In this review we explore issues of the sensitivity of Bayes estimates to the prior and form of the likelihood. With respect to the prior, we argue that non-Bayesian analyses also incorporate prior information, illustrate that the Bayes posterior mean and the frequentist maximum likelihood...

The purpose of this paper is to examine the role of multilateral adjustment to U.S. external imbalances in driving bilateral real exchange rate movements by developing a new regime-switching model that consists of a Markov-switching model with a time-varying transition matrix that depends on a...

This Paper examines the properties of G-7 cycles using a multicountry Bayesian panel VAR model with time variations, unit specific dynamics and cross country interdependences. We demonstrate the presence of a significant world cycle and show that country specific indicators play a much smaller...

Macroeconomic practitioners frequently work with multivariate time series models such as VARs, factor augmented VARs as well as time-varying parameter versions of these models (including variants with multivariate stochastic volatility). These models have a large number of parameters and, thus,...

In this paper we report the results of the estimation of a rich dynamic stochastic general equilibrium (DSGE) model of the U.S. economy with both stochastic volatility and parameter drifting in the Taylor rule. We use the results of this estimation to examine the recent monetary history of the...

We propose a new approach to forecasting the term structure of interest rates, which allows to efficiently extract the information contained in a large panel of yields. In particular, we use a large Bayesian Vector Autoregression (BVAR) with an optimal amount of shrinkage towards univariate AR...

This paper compares the role of stochastic volatility versus changes in monetary policy rules in accounting for the time-varying volatility of U.S. aggregate data. Of special interest to us is understanding the sources of the great moderation of business cycle fluctuations that the U.S. economy...

In this paper, I review the literature on the formulation and estimation of dynamic stochastic general equilibrium (DSGE) models with a special emphasis on Bayesian methods. First, I discuss the evolution of DSGE models over the last couple of decades. Second, I explain why the profession has...