Giannone, Domenico; Lenza, Michèle; Primiceri, Giorgio E. - European Centre for Advanced Research in Economics and … - 2012
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....