Journal of Statistical and Econometric Methods

Panel Bayesian VAR Modeling for Policy and Forecasting when dealing with confounding and latent effects

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  • Abstract

    The paper develops empirical implementations of the standard time varying Panel Bayesian VAR model to deal with confounding and latent effects. Bayesian computations and mixed hierarchical distributions are used to generate posteriors of conditional impulse responses and conditional forecasts. An empirical application to Eurozone countries illustrates the functioning of the model. A survey on policy recommendations and business cycles convergence are also conducted. The paper would enhance the more recent studies to evaluate idiosyncratic business cycles, policy-making, and structural spillovers forecasting. The analysis confirms the importance to separate common shocks from propagation of country- and variable-specific shocks.

    Mathematics Subject Classification: 62C12; 62F15; 62P20
    Keywords: Hierarchical Mixture Distributions in Normal Linear Model;Bayesian Model Averaging; Panel VAR; Forecasting; Structural Spillovers; MCMC Implementations.