Sparse Graphical Vector Autoregression: A Bayesian Approach

27 Pages Posted: 23 Dec 2014 Last revised: 10 Sep 2016

See all articles by Daniel Felix Ahelegbey

Daniel Felix Ahelegbey

University of Pavia, Department of Economics and Management; Boston University, Department of Mathematics & Statistics

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 15, 2016

Abstract

This paper considers a sparsity approach for inference in large vector autoregressive (VAR) models. The approach is based on a Bayesian procedure and a graphical representation of VAR models. We discuss a Markov chain Monte Carlo algorithm for sparse graph selection, parameter estimation, and equation-specific lag selection. We show the efficiency of our algorithm on simulated data and illustrate the effectiveness of our approach in forecasting macroeconomic time series and in measuring contagion risk among financial institutions.

Keywords: Large VAR, Model Selection, Prior Distribution, Sparse Graphical Models

JEL Classification: C11, C15, C52, C55, E17, G01, G17

Suggested Citation

Ahelegbey, Daniel Felix and Billio, Monica and Casarin, Roberto, Sparse Graphical Vector Autoregression: A Bayesian Approach (May 15, 2016). Available at SSRN: https://ssrn.com/abstract=2542070 or http://dx.doi.org/10.2139/ssrn.2542070

Daniel Felix Ahelegbey (Contact Author)

University of Pavia, Department of Economics and Management ( email )

Via San Felice 7
Pavia, Lombardia 27100
Italy
+393888931128 (Phone)

HOME PAGE: http://sites.google.com/site/danielfelixahey/home

Boston University, Department of Mathematics & Statistics ( email )

111 Cummington Mall
Boston, MA 02215
United States

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics ( email )

San Giobbe 873/b
Venice, 30121
Italy
+39 030.298.91.49 (Phone)
+39 030.298.88.37 (Fax)

HOME PAGE: http://sites.google.com/view/robertocasarin

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