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Structural Panel Bayesian VAR Model to Deal with Model Misspecification and Unobserved Heterogeneity Problems

Department of Political Sciences, LUISS Guido Carli University and CEFOP-LUISS, 00197 Rome, Italy
Econometrics 2019, 7(1), 8; https://doi.org/10.3390/econometrics7010008
Received: 4 September 2018 / Revised: 23 February 2019 / Accepted: 5 March 2019 / Published: 11 March 2019
(This article belongs to the Special Issue Big Data in Economics and Finance)
This paper provides an overview of a time-varying Structural Panel Bayesian Vector Autoregression model that deals with model misspecification and unobserved heterogeneity problems in applied macroeconomic analyses when studying time-varying relationships and dynamic interdependencies among countries and variables. I discuss what its distinctive features are, what it is used for, and how it can be analytically derived. I also describe how it is estimated and how structural spillovers and shock identification are performed. The model is empirically applied to a set of developed European economies to illustrate the functioning and the ability of the model. The paper also discusses more recent studies that have used multivariate dynamic macro-panels to evaluate idiosyncratic business cycles, policy-making, and spillover effects among different sectors and countries. View Full-Text
Keywords: panel VAR; Bayesian inference; structural spillovers; hierarchical priors; MCMC implementations panel VAR; Bayesian inference; structural spillovers; hierarchical priors; MCMC implementations
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Pacifico, A. Structural Panel Bayesian VAR Model to Deal with Model Misspecification and Unobserved Heterogeneity Problems. Econometrics 2019, 7, 8.

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