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Title: Markov-Switching Mixed-Frequency VAR Models

Author(s): Claudia Foroni, Pierre Guérin and Massimiliano Marcellino

Publication Date: February 2014

Keyword(s): Fore-, Markov-switching, MIDAS, Mixed-frequency VAR and Nowcasting

Programme Area(s): International Macroeconomics

Abstract: This paper introduces regime switching parameters in the Mixed-Frequency VAR model. We first discuss estimation and inference for Markov-switching Mixed-Frequency VAR (MSMF-VAR) models. Next, we assess the finite sample performance of the technique in Monte-Carlo experiments. Finally, the MSMF-VAR model is applied to predict GDP growth and business cycle turning points in the euro area. Its performance is compared with that of a number of competing models, including linear and regime switching mixed data sampling (MIDAS) models. The results suggest that MSMF-VAR models are particularly useful to estimate the status of economic activity.

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Bibliographic Reference

Foroni, C, Guérin, P and Marcellino, M. 2014. 'Markov-Switching Mixed-Frequency VAR Models'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9815