In this paper we discuss how the point and density forecasting performance of Bayesian vector autoregressions (BVARs) is affected by a number of specification choices. We adopt as a benchmark a common specification in the literature, a BVAR with variables entering in levels and a prior modeled...

The empirical analysis of monetary policy requires the construction of instruments for future expected inflation. Dynamic factor models have been applied rather successfully to inflation forecasting. In fact, two competing methods have recently been developed to estimate large-scale dynamic...