Regime-Switching Global Vector Autoregressive Models

56 Pages Posted: 12 Aug 2013

See all articles by Michael Binder

Michael Binder

Goethe University Frankfurt; CESifo (Center for Economic Studies and Ifo Institute)

Marco Gross

International Monetary Fund (IMF); European Central Bank (ECB)

Date Written: August 2013

Abstract

The purpose of the paper is to develop a Regime-Switching Global Vector Autoregressive (RS-GVAR) model. The RS-GVAR model allows for recurring or non-recurring structural changes in all or a subset of countries. It can be used to generate regime-dependent impulse response functions which are conditional upon a regime-constellation across countries. Coupling the RS and the GVAR methodology improves out-of-sample forecast accuracy signi significantly in an application to real GDP, price inflation, and stock prices.

Keywords: Global macroeconometric modeling, nonlinear modeling, regime switching, forecasting and simulation

JEL Classification: C32, E17, G20

Suggested Citation

Binder, Michael and Gross, Marco, Regime-Switching Global Vector Autoregressive Models (August 2013). ECB Working Paper No. 1569, Available at SSRN: https://ssrn.com/abstract=2302510

Michael Binder (Contact Author)

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Gr├╝neburgplatz 1
Frankfurt, 60323
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Marco Gross

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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