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.