Dynamic shrinkage in time‐varying parameter stochastic volatility in mean models (replication data)

DOI

Successful forecasting models strike a balance between parsimony and flexibility. This is often achieved by employing suitable shrinkage priors that penalize model complexity but also reward model fit. In this article, we modify the stochastic volatility in mean (SVM) model by introducing state-of-the-art shrinkage techniques that allow for time variation in the degree of shrinkage. Using a real-time inflation forecast exercise, we show that employing more flexible prior distributions on several key parameters sometimes improves forecast performance for the United States, the United Kingdom, and the euro area (EA). Comparing in-sample results reveals that our proposed model yields qualitatively similar insights to the original version of the model.

Identifier
DOI https://doi.org/10.15456/jae.2022327.0716203037
Metadata Access https://www.da-ra.de/oaip/oai?verb=GetRecord&metadataPrefix=oai_dc&identifier=oai:oai.da-ra.de:775226
Provenance
Creator Huber, Florian; Pfarrhofer, Michael
Publisher ZBW - Leibniz Informationszentrum Wirtschaft
Publication Year 2021
Rights Creative Commons Attribution 4.0 (CC-BY); Download
OpenAccess true
Contact ZBW - Leibniz Informationszentrum Wirtschaft
Representation
Language English
Resource Type Collection
Discipline Economics