Bayesian inference requires an analyst to set priors. Setting the right prior is crucial for precise forecasts. This paper analyzes how optimal prior changes when an economy is hit by a recession. For this task, an autoregressive distributed lag (ADL) model is chosen. The results show that a...

Modern economic theories explain differences in productivity and economic growth across countries by differences in political and economic institutions, and differences in culture, geographical location, policies, and laws. The success of any of these theories in explaining the gap in...

The diagonal GARCH(1,1) model is shown to support identification of the triangular system and is argued as a higher moment analog to traditional exclusion restrictions. Estimators for this result include QML and GMM. For the GMM estimator, only partial parameterization of the conditional...

The paper compares one-period ahead forecasting performance of linear vector-autoregressive (VAR) models and single-equation Markov-switching (MS) models for two cases: when leading information is available and when it is not. The results show that single-equation MS models tend to perform...

We establish the strong consistency and asymptotic normality of the quasi-maximum likelihood estimator of the parameters of a class of multivariate GARCH processes. The conditions are mild and coincide with the minimal ones in the univariate case. In particular, contrary to the current...

In this paper, we extend Bai and Perron's (1998, Econometrica, pp. 47-78) method for detecting multiple breaks to nonlinear models. To that end, we consider a nonlinear model that can be estimated via nonlinear least squares (NLS) and features a limited number of parameter shifts occurring at...

We show in this paper that the treatment of conditional heteroskedasticity inside nonlinear systems of simultaneous equations is a sufficiently manageable matter for some types of multivariate ARCH error structures. Reparameterization makes it possible to estimate the model by means of the...

The diagonal GARCH(1,1) model is shown to support identification of the triangular system and is argued as a second moment analog to traditional exclusion restrictions. Estimators for this result include QML and GMM. The GMM estimator contains many (potential weak) moment conditions that can be...

The diagonal GARCH(1,1) model is shown to support identification of the triangular system and is argued as a second moment analog to traditional exclusion restrictions. Estimators for this result include QML and GMM. The GMM estimator contains many (potential weak) moment conditions that can be...

We introduce the notion of continuously invertible volatility models that relies on some Lyapunov condition and some regularity condition. We show that it is almost equivalent to the volatilities forecasting efficiency of the parametric inference approach based on the Stochastic Recurrence...