arXiv 20 Nov 2023 · Econometrics · publishedJournal of Business and Economic Statistics (2025)
arXiv:2311.11858 · PDF · DOI · OpenAlex · Extracted main text
This paper introduces a novel theory-coherent shrinkage prior for Time-Varying Parameter VARs (TVP-VARs). The prior centers the time-varying parameters on a path implied a priori by an underlying economic theory, chosen to describe the dynamics of the macroeconomic variables in the system. Leveraging information from conventional economic theory using this prior significantly improves inference precision and forecast accuracy compared to the standard TVP-VAR. In an application, I use this prior to incorporate information from a New Keynesian model that includes both the Zero Lower Bound (ZLB) and forward guidance into a medium-scale TVP-VAR model. This approach leads to more precise estimates of the impulse response functions, revealing a distinct propagation of risk premium shocks inside and outside the ZLB in US data.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Del Negro, Marco, Schorfheide, Frank (2004) Priors from General Equilibrium Models for VARS* | 0.977 | 15 | 4 | 93% |
| 2 | Cagliarini, Adam, Kulish, Mariano (2013) Solving Linear Rational Expectations Models with Predictable Structural Changes | 0.928 | 4 | 3 | 100% |
| 3 | Del Negro, Marco, Giannoni, Marc P., Schorfheide, Frank (2015) Inflation in the Great Recession and New Keynesian Models | 0.888 | 10 | 3 | 70% |
| 4 | Chan, Joshua CC, Jeliazkov, Ivan (2009) Efficient simulation and integrated likelihood estimation in state space models | 0.874 | 6 | 3 | 67% |
| 5 | Benati, Luca, Lubik, Thomas A (2023) Impulse Response Analysis at the Zero Lower Bound | 0.874 | 5 | 2 | 100% |
| 6 | Cogley, Timothy, Sargent, Thomas (2002) Evolving Post-World War II US Inflation Dynamics | 0.737 | 3 | 2 | 100% |
| 7 | Carriero, Andrea, Clark, Todd E., Marcellino, Massimiliano (2021) No-arbitrage priors, drifting volatilities, and the term structure of interest rates | 0.737 | 3 | 2 | 100% |
| 8 | Primiceri, Giorgio E (2005) Time varying structural vector autoregressions and monetary policy | 0.737 | 3 | 2 | 100% |
| 9 | Sims, Christopher (2002) Solving Linear Rational Expectations Models | 0.737 | 3 | 2 | 100% |
| 10 | Debortoli, Davide, Galí, Jordi, Gambetti, Luca (2019) On the Empirical (Ir)relevance of the Zero Lower Bound Constraint | 0.644 | 4 | 1 | 100% |
Showing the top 10 of 47 scored citations.