Regime-Switching Global Vector Autoregressive Models
56 Pages Posted: 12 Aug 2013
Date Written: August 2013
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 signisignificantly 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
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