Department of Economics

Faculty of Arts and Social Sciences


Seminar - Upcoming

2013 Asia Summer Institute in Behavioral Economics
Asian Meeting of the Econometric Society 2013
Past Events
Department Seminar


Large Time-Varying Parameter VARs: A Non-Parametric Approach


Massimiliano Marcellino
Bocconi University

Date: Dec 16, Fri

Time: 4 - 5:30 pm

Venue: Lim Tay Boh Seminar Room (AS2 03-12)
National University of Singapore
1 Arts Link, Singapore 117570

Chair: Denis Tkachenko

In this paper we introduce a nonparametric estimation method for a large Vector Autoregression (VAR) with time-varying parameters. The estimators and their asymptotic distributions are available in closed form. This makes the method computationally efficient and capable of handling information sets as large as those typically handled by factor models and Factor Augmented VARs (FAVAR). When applied to the problem of forecasting key macroeconomic variables, the method outperforms constant parameter benchmarks and large (parametric) Bayesian VARs with time-varying parameters. The tool can also be used for structural analysis. As an example, we study the time-varying effects of oil price innovations on sectoral U.S. industrial output. We find that the changing interaction between unexpected oil price increases and business cycle fluctuations is shaped by the durable materials sector, rather by the automotive sector on which a large part of the literature has typically focused.