Large Bayesian VAR for the Chilean Economy

Wildo Gonzalez

doi:10.4067/S0718-88702012000200003

Authors

Wildo Gonzalez Gerencia de Análisis Macroeconómico, Banco Central de Chile

DOI:

https://doi.org/10.4067/S0718-88702012000200003

Keywords:

Bayesian VAR, forecasting, bayesian shrinkage, large cross-sections

Abstract

This article develops a Large Bayesian VAR with more than 100 variables for the Chilean economy, as Banbura, Giannone and Reichlin (2010) shows that, when the degree of shrinkage is set in relation to the cross-sectional dimension of the sample (bayesian shrinkage), the forecasting performance of a VAR can be improved by adding macroeconomic variables and sectoral information. The results show that the large bayesian VAR compares favorably with some univariate models. It further examines the impulse response functions to a monetary shock, as well as some sectoral shocks

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References

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