Koop, G. and Korobilis, D. (2016) Model uncertainty in panel vector autoregressive models. European Economic Review, 81, pp. 115-131. (doi: 10.1016/j.euroecorev.2015.09.006)
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Abstract
We develop methods for Bayesian model averaging (BMA) or selection (BMS) in Panel Vector Autoregressions (PVARs). Our approach allows us to select between or average over all possible combinations of restricted PVARs where the restrictions involve interdependencies between and heterogeneities across cross-sectional units. The resulting BMA framework can find a parsimonious PVAR specification, thus dealing with overparameterization concerns. We use these methods in an application involving the euro area sovereign debt crisis and show that our methods perform better than alternatives. Our findings contradict a simple view of the sovereign debt crisis which divides the euro zone into groups of core and peripheral countries and worries about financial contagion within the latter group.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Korompilis Magkas, Professor Dimitris |
Authors: | Koop, G., and Korobilis, D. |
Subjects: | H Social Sciences > HA Statistics |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | European Economic Review |
Publisher: | Elsevier |
ISSN: | 0014-2921 |
ISSN (Online): | 1873-572X |
Published Online: | 09 October 2015 |
Copyright Holders: | Copyright © 2015 Elsevier |
First Published: | First published in European Economic Review 81:115-131 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher. |
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