Proxy Vector Autoregressions in a data-rich environment

Bruns, Martin (2021) Proxy Vector Autoregressions in a data-rich environment. Journal of Economic Dynamics and Control, 123. ISSN 0165-1889

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I propose a Bayesian approach to identify vector autoregressive (VAR) models via proxies in a data-rich environment. The setup augments a small-scale VAR model with latent factors. It allows to trace out the responses of disaggregated series in a unified model while controlling for broad economic conditions. The posterior sampler accounts for the estimation uncertainty in these latent factors as well as the measurement precision of the proxy. In a first application to monetary policy, I extract factors from a wide range of real and financial series and find that the effects of monetary policy shocks vary along the yield curve. In a second application to oil market shocks I add disaggregated US series to a standard model of the global oil market. I find that negative news about future oil supply have adverse effects on the US economy.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
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Depositing User: LivePure Connector
Date Deposited: 11 Dec 2020 00:48
Last Modified: 30 Sep 2021 15:58
DOI: 10.1016/j.jedc.2020.104046

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