DP4033 Panel Index VAR Models: Specification, Estimation, Testing and Leading Indicators
|Author(s):||Fabio Canova, Matteo Ciccarelli|
|Publication Date:||August 2003|
|Keyword(s):||bayesian methods, leading indicators, markov chain monte carlo methods, panel var|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4033|
This Paper proposes a method to conduct inference in panel VAR models with cross-unit interdependencies and time variations in the coefficients. The set-up used is Bayesian, and Markov chain Monte Carlo (MCMC) methods are used to estimate the posterior distribution of the features of interest. The model is re-parameterized to resemble an observable index model and specification searches are discussed. The approach can be used to construct multi-unit forecasts, leading indicators and to conduct policy analysis in multi-unit set-ups. The methodology is employed to construct leading indicators for inflation and GDP growth in the euro area.