Chiu, Ching-Wai (Jeremy), Mumtaz, Haroon and Pinter, Gabor (2016) VAR models with non-Gaussian shocks. CFM discussion paper series (CFM-DP2016-09). Centre For Macroeconomics, London, UK.
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Abstract
We introduce a Bayesian VAR model with non-Gaussian disturbances that are modelled with a finite mixture of normal distributions. Importantly, we allow for regime switching among the different components of the mixture of normals. Our model is highly flexible and can capture distributions that are fat-tailed, skewed and even multimodal. We show that our model can generate large out-of-sample forecast gains relative to standard forecasting models, especially during tranquil periods. Our model forecasts are also competitive with those generated by the conventional VAR model with stochastic volatility.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://www.centreformacroeconomics.ac.uk/Home.aspx |
| Additional Information: | © 2016 The Authors |
| Divisions: | Centre for Macroeconomics |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C11 - Bayesian Analysis C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C32 - Time-Series Models C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection |
| Date Deposited: | 13 Dec 2017 10:09 |
| Last Modified: | 13 Sep 2024 20:37 |
| URI: | http://eprints.lse.ac.uk/id/eprint/86238 |
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