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Factor Augmented Vector Autoregressions, Panel VARs, and Global VARs

  • Martin FeldkircherEmail author
  • Florian Huber
  • Michael Pfarrhofer
Chapter
Part of the Advanced Studies in Theoretical and Applied Econometrics book series (ASTA, volume 52)

Abstract

This chapter provides a thorough introduction to panel, global, and factor augmented vector autoregressive models. These models are typically used to capture interactions across units (i.e., countries) and variable types. Since including a large number of countries and/or variables increases the dimension of the models, all three approaches aim to decrease the dimensionality of the parameter space. After introducing each model, we briefly discuss key specification issues. A running toy example serves to highlight this point and outlines key differences across the different models. To illustrate the merits of the competing approaches, we perform a forecasting exercise and show that it pays off to introduce cross-sectional information in terms of forecasting key macroeconomic quantities.

Notes

Acknowledgement

The authors gratefully acknowledge financial support by the Austrian Science Fund (FWF): ZK 35-G.

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  • Martin Feldkircher
    • 1
    Email author
  • Florian Huber
    • 2
  • Michael Pfarrhofer
    • 2
  1. 1.Oesterreichische Nationalbank (OeNB)ViennaAustria
  2. 2.Salzburg Centre of European Union Studies (SCEUS)University of SalzburgSalzburgAustria

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