Title: A large Bayesian VAR of the United States economy
Authors: Domenico Giannone - University of Washington (United States) [presenting]
Richard Crump - Federal Reserve Bank of New York (United States)
Argia Sbordone - Federal Reserve Bank of New York (United States)
Eric Qian - Princeton University (United States)
Stefano Eusepi - University of Texas at Austin (United States)
Abstract: The United States' macroeconomic and financial sectors are modelled using a formal and unified econometric model. Through shrinkage, our Bayesian VAR provides a flexible framework for modeling the dynamics of thirty-one variables, many of which are tracked by the Federal Reserve. We show how the model can be used for understanding key features of the data, constructing counterfactual scenarios, and evaluating the macroeconomic environment both retrospectively and prospectively. Considering its breadth and versatility for policy applications, our modeling approach gives a reliable, reduced-form alternative to structural models.