Small vector autoregressions are commonly used in macroeconomics for forecasting and evaluating shock trans-mission. This requires VAR parameters to be stable over the evaluation and forecast sample or modeled as time-varying. Prior work has considered whether there were sizable parameter changes in the early 1980s and in the subsequent period until the beginning of the new century. This paper conducts a similar analysis focused on the period since the recent crisis. Using a range of techniques, we provide substantial evidence against parame-ter stability. The evolution of the unemployment rate seems particularly different relative to its past behavior. We also evaluate alternative methods to handle parameter instability in a forecasting context

Have standard VARS remained stable since the crisis?

Carriero, Andrea;Marcellino, Massimiliano;
2017

Abstract

Small vector autoregressions are commonly used in macroeconomics for forecasting and evaluating shock trans-mission. This requires VAR parameters to be stable over the evaluation and forecast sample or modeled as time-varying. Prior work has considered whether there were sizable parameter changes in the early 1980s and in the subsequent period until the beginning of the new century. This paper conducts a similar analysis focused on the period since the recent crisis. Using a range of techniques, we provide substantial evidence against parame-ter stability. The evolution of the unemployment rate seems particularly different relative to its past behavior. We also evaluate alternative methods to handle parameter instability in a forecasting context
2017
2016
Aastveit, Knut Are; Carriero, Andrea; Marcellino, Massimiliano; Clark, Todd E.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4000555
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