Uncertainty Through the Lenses of a Mixed-Frequency Bayesian Panel Markov Switching Model

79 Pages Posted: 4 Oct 2017 Last revised: 9 Oct 2017

See all articles by Roberto Casarin

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Claudia Foroni

Deutsche Bundesbank

Massimiliano Giuseppe Marcellino

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management; BI Norwegian Business School

Date Written: September 2017

Abstract

We propose a Bayesian panel model for mixed frequency data, where parameters can change over time according to a Markov process. Our model allows for both structural instability and random effects. To estimate the model, we develop a Markov Chain Monte Carlo algorithm for sampling from the joint posterior distribution of the model parameters, and we test its properties in simulation experiments. We use the model to study the effects of macroeconomic uncertainty and financiall uncertainty on a set of variables in a multi-country context including the US, several European countries and Japan. Wefind that for most of the variables financial uncertainty dominates macroeconomic uncertainty. Furthermore, we show that the effects of uncertainty differ whether the economy is in a contraction regime or in an expansion regime.

Keywords: Bayesian inference, dynamic panel model, Markov switching, MCMC, mixed-frequency

JEL Classification: C13, C14, C51, C53

Suggested Citation

Casarin, Roberto and Foroni, Claudia and Marcellino, Massimiliano and Ravazzolo, Francesco, Uncertainty Through the Lenses of a Mixed-Frequency Bayesian Panel Markov Switching Model (September 2017). CEPR Discussion Paper No. DP12339, Available at SSRN: https://ssrn.com/abstract=3047326

Roberto Casarin (Contact Author)

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

Claudia Foroni

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Massimiliano Marcellino

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.francescoravazzolo.com/

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