Large Bayesian VARs: A Flexible Kronecker Error Covariance Structure

Joshua Chan (2015)
CAMA Working Paper 41/2015
[ Working Paper | Code ]

This code estimates seven large Bayesian VARs with a variety of flexible covariance structures, allowing for non-Gaussian, heteroscedastic and serially dependent innovations.

The application is illustrated using a US dataset of 20 macroeconomic variables at quarterly frequency. This code also computes the marginal likelihood for each model.

The seven large Bayesian VARs are:

  1. BVAR: standard BVAR with iid Gaussian innovations
  2. BVAR-t: BVAR with t innovations
  3. BVAR-CSV: BVAR with a common stochastic volatility
  4. BVAR-MA: BVAR with MA(1) Gaussian innovations
  5. BVAR-t-CSV: BVAR with a common stochastic volatility and t innovations
  6. BVAR-t-MA: BVAR with MA(1) t innovations
  7. BVAR-CSV-MA: BVAR with a common stochastic volatility and MA(1) innovations