This article develops a new econometric methodology for performing stochastic model specification search (SMSS) in the vast model space of time-varying parameter VARs with stochastic volatility and correlated state transitions. This is motivated by the concern of over-fitting and the typically...

There are both theoretical and empirical reasons for believing that the parameters of macroeconomic models may vary over time. However, work with time-varying parameter models has largely involved Vector autoregressions (VARs), ignoring cointegrations. This is despite the fact that cointegration...