DP9815 Markov-Switching Mixed-Frequency VAR Models
|Author(s):||Claudia Foroni, Pierre Guérin, Massimiliano Marcellino|
|Publication Date:||February 2014|
|Keyword(s):||Fore-, Markov-switching, MIDAS, Mixed-frequency VAR, Nowcasting|
|JEL(s):||C53, E32, E37|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9815|
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.