Estimating (Markov-switching) VAR models without Gibbs sampling : a sequential Monte Carlo approach

Mark Bognanni and Edward P. Herbst

Vector autoregressions with Markov-switching parameters (MS-VARs) fit the data better than do their constant-parameter predecessors. However, Bayesian inference for MS-VARs with existing algorithms remains challenging. For our first contribution, we show that Sequential Monte Carlo (SMC) estimators accurately estimate Bayesian MS-VAR posteriors. Relative to multi-step, model-specific MCMC routines, SMC has the advantages of generality, parallelizability, and freedom from reliance on particular analytical relationships between prior and likelihood. For our second contribution, we use SMC's flexibility to demonstrate that the choice of prior drives the key empirical finding of Sims, Waggoner, and Zha (2008) as much as does the data

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Year of publication:	December 10, 2015 ; This draft: December 10, 2015
Authors:	Bognanni, Mark ; Herbst, Edward P.
Publisher:	Washington, D.C. : Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board
Subject:	Monte-Carlo-Simulation \| Monte Carlo simulation \| VAR-Modell \| VAR model \| Schätztheorie \| Estimation theory \| Markov-Kette \| Markov chain \| Stichprobenerhebung \| Sampling \| Zeitreihenanalyse \| Time series analysis \| Schätzung \| Estimation