Measuring International Uncertainty Using Global Vector Autoregressions with Drifting Parameters
Author | : Michael Pfarrhofer |
Publisher | : |
Total Pages | : |
Release | : 2019 |
ISBN-10 | : OCLC:1159227588 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Measuring International Uncertainty Using Global Vector Autoregressions with Drifting Parameters written by Michael Pfarrhofer and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the time-varying impacts of international macroeconomic uncertainty shocks. We use a global vector autoregressive (GVAR) specification with drifting coefficients and factor stochastic volatility in the errors to model six economies jointly. The measure of uncertainty is constructed endogenously by estimating a scalar driving the innovation variances of the latent factors, and is included also in the mean of the process. To achieve regularization, we use Bayesian techniques for estimation, and introduce a set of hierarchical global-local shrinkage priors. The adopted priors center the model on a constant parameter specification with homoscedastic errors, but allow for time-variation if suggested by likelihood information. Moreover, we assume coefficients across economies to be similar, but provide sufficient flexibility via the hierarchical prior for country-specific idiosyncrasies. The results point towards pronounced real and financial effects of uncertainty shocks in all countries, with differences across economies and over time.