Juho Pitkäranta, Economist

Tag: vector autoregression

  • Note on accept/reject algorithms for sign restricted VARs

    Background The algorithm described by Rubio-Ramírez, Waggoner and Zha (2010) remain one of the most widely used tools of decomposing the reduced form errors of a vector autoregression (VAR) into economically meaningful shocks. The algorithm draws random orthogonal matrices which are then multiplied with a continuous function (usually Cholesky decomposition) of the reduced form covariance…

  • The case for steady state priors in BVARs – application to the euro area inflation surge

    The case for steady state priors in BVARs – application to the euro area inflation surge

    Note: Due to a small coding error in the original modelling, this post has been edited since its initial release. Results and discussion remain qualitatively the same, while some differences in the impulse responses emerged. Historical decompositions remain practically the same. Although practical algorithms for Gibbs sampling have been available for some time (see Villani,…