We propose a classical approach to estimate factor-augmented vector autoregressive (FAVAR) models with time variation in the factor loadings, in the factor dynamics, and in the variance-covariance matrix of innovations. When the time-varying FAVAR is estimated using a large quarterly dataset of...

The term structure of inflation forecasts disagreement in the US can be summarized by two components: disagreement about the trend inflation, and disagreement about the cyclical inflation. While the former has identical impacts on forecasts disagreement across forecasting horizons, the latter...