Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130773
Authors: 
Carriero, Andrea
Clark, Todd E.
Marcellino, Massimiliano
Year of Publication: 
2015
Series/Report no.: 
Working Paper, School of Economics and Finance, Queen Mary University of London 759
Abstract: 
We propose a new algorithm which allows easy estimation of Vector Autoregressions (VARs) featuring asymmetric priors and time varying volatilities, even when the cross sectional dimension of the system N is particularly large. The algorithm is based on a simple triangularisation which allows to simulate the conditional mean coefficients of the VAR by drawing them equation by equation. This strategy reduces the computational complexity by a factor of N2 with respect to the existing algorithms routinely used in the literature and by practitioners. Importantly, this new algorithm can be easily obtained by modifying just one of the steps of the existing algorithms. We illustrate the benefits of the algorithm with numerical and empirical applications.
Subjects: 
Bayesian VARs
Stochastic volatility
Large datasets
Forecasting
Impulse response functions
JEL: 
C11
C13
C33
C53
Document Type: 
Working Paper

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