Banbura, Marta; Giannone, Domenico; Reichlin, Lucrezia - In: Journal of Applied Econometrics 25 (2010) 1, pp. 71-92
This paper shows that vector auto regression (VAR) with Bayesian shrinkage is an appropriate tool for large dynamic models. We build on the results of De Mol and co-workers (2008) and show that, when the degree of shrinkage is set in relation to the cross-sectional dimension, the forecasting...
