In this paper, a Bayesian approach is suggested to compare unit root models with stationary models when both the level and the error variance are subject to structural changes (known as breaks) of an unknown date. The paper utilizes analytic and Monte Carlo integration techniques for calculating...

Similar to Ingram and Whiteman (1994), De Jong et al. (1993) and Del Negro and Schorfheide (2004) this study proposes a methodology of constructing Dynamic Stochastic General Equilibrium (DSGE) consistent prior distributions for Bayesian Vector Autoregressive (BVAR) models. The moments of the...

This paper proposes a novel and flexible framework to estimate autoregressive models with time-varying parameters. Our setup nests various adaptive algorithms that are commonly used in the macroeconometric literature, such as learning-expectations and forgetting-factor algorithms. These are...

In this paper we compared the performance of country specific and regional indicators of reserve adequacy in predicting, out of sample, the balance of payment crisis affecting the South East Asian region during the 1997-98 period. A Dynamic Factor method was used to retrieve reserve adequacy...

In this paper we compare the performance of a regional indicator of vulnerability in predicting, out of sample, the crisis events affecting the South East Asian region during the 1997-98 period. A Dynamic Factor method was used to retrieve the vulnerability indicator and stochastic simulation is...

The estimation of dynamic factor models for large sets of variables has attracted considerable attention recently, due to the increased availability of large datasets. In this paper we propose a new methodology for estimating factors from large datasets based on state space models, discuss its...

This paper analyses the use of factor analysis for instrumental variable estimation when the number of instruments tends to infinity. We consider cases where the unobserved factors are the optimal instruments but also cases where the factors are not necessarily the optimal instruments but can...

In this paper we investigate whether the currency risk is priced in international stock markets. We suggest a parsimonious version of the international capital asset pricing model with an EGARCH-M(1,1) specification of the second moments' dynamics of stock and currency returns, assuming that 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...

Models based on economic theory have serious problems at forecasting exchange rates better than simple univariate driftless random walk models, especially at short horizons. Multivariate time series models suffer from the same problem. In this paper, we propose to forecast exchange rates with a...