Interacted panel VAR (IPVAR) models allow coefficients to vary as a deterministic function of observable country characteristics. The varying coefficient Bayesian panel VAR generalises this to the stochastic case. As an application of this framework, I examine if the impact of commodity price...

This paper studies the effects of macroeconomic shocks on business investment in the United Kingdom by filtering a large UK firm-level based dataset of financial accounts into macro-level proxy indicators, and then using these indicators in a Bayesian vector autoregression framework to analyse...

House prices and exchange rates can potentially amplify the expansionary effect of capital inflows by inflating the value of collateral. We first set up a model of collateralized borrowing in domestic and foreign currency with international financial intermediation in which a change in leverage...

In this paper, we provide evidence that fat tails and stochastic volatility can be important in improving in-sample fit and out-of-sample forecasting performance. Specifically, we construct a VAR model where the orthogonalised shocks feature Student's t distribution and time-varying variance. We...

In this paper, we investigate the dynamic relationship between financial market volatility, macroeconomic fundamentals and investor sentiment, employing a two-factor model to decompose volatility into a persistent long-run component and a transitory short-run component. Using a structural VAR...

We present a new method for estimating Bayesian vector auto-regression (VAR) models using priors from a dynamic stochastic general equilibrium (DSGE) model. We use the DSGE model priors to determine the moments of an independent Normal-Wishart prior for the VAR parameters. Two hyper-parameters...

Sectoral supply shocks can trigger shortages in aggregate demand when strong sectoral complementarities are at play. US data on sectoral output and prices offer support to this notion of ‘Keynesian supply shocks’ and their underlying transmission mechanism. Demand shocks derived from...

We propose to exploit stochastic volatility for statistical identification of structural vector autoregressive models (SV-SVAR). We discuss full and partial identification of the model and develop efficient Expectation Maximization algorithms for Maximum Likelihood inference. Simulation evidence...

The aim of this paper is to explore the evolution of real exchange rate dynamics over time. We use a time-varying structural vector autoregression to investigate the role of demand, supply and nominal shocks and consider their impact on, and contribution to fluctuations in, the real exchange...