A time-varying parameter structural model of the UK economy

George Kapetanios; Riccardo M. Masolo; Riccardo Maria Masolo; Katerina Petrova; Matthew Waldron

doi:10.1016/j.jedc.2019.05.012

A time-varying parameter structural model of the UK economy

George Kapetanios, Riccardo M. Masolo, Riccardo Maria Masolo, Katerina Petrova, Matthew Waldron

Risultato della ricerca: Contributo in rivista › Articolo in rivista

Abstract

We estimate a time-varying parameter structural macroeconomic model of the UK econ- omy, using a Bayesian local likelihood methodology. This enables us to estimate a large open-economy DSGE model over a sample that comprises several different monetary pol- icy regimes and an incomplete set of data. Our estimation identifies a gradual shift to a monetary policy regime characterised by an increased responsiveness of policy towards inflation alongside a decrease in the inflation trend down to the two percent target level. The time-varying model also performs remarkably well in forecasting and delivers statis- tically significant accuracy improvements for most variables and horizons for both point and density forecasts compared to the standard fixed-parameter version.

Lingua originale	English
pagine (da-a)	N/A-N/A
Rivista	JOURNAL OF ECONOMIC DYNAMICS & CONTROL
Volume	106
DOI	https://doi.org/10.1016/j.jedc.2019.05.012
Stato di pubblicazione	Pubblicato - 2019

Keywords

DSGE models
Open economy
Time varying parameters
UK economy

Accesso al documento

10.1016/j.jedc.2019.05.012

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abstract = "We estimate a time-varying parameter structural macroeconomic model of the UK econ- omy, using a Bayesian local likelihood methodology. This enables us to estimate a large open-economy DSGE model over a sample that comprises several different monetary pol- icy regimes and an incomplete set of data. Our estimation identifies a gradual shift to a monetary policy regime characterised by an increased responsiveness of policy towards inflation alongside a decrease in the inflation trend down to the two percent target level. The time-varying model also performs remarkably well in forecasting and delivers statis- tically significant accuracy improvements for most variables and horizons for both point and density forecasts compared to the standard fixed-parameter version.",

keywords = "DSGE models, Open economy, Time varying parameters, UK economy, DSGE models, Open economy, Time varying parameters, UK economy",

author = "George Kapetanios and Masolo, {Riccardo M.} and Masolo, {Riccardo Maria} and Katerina Petrova and Matthew Waldron",

year = "2019",

doi = "10.1016/j.jedc.2019.05.012",

language = "English",

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AU - Waldron, Matthew

PY - 2019

Y1 - 2019

N2 - We estimate a time-varying parameter structural macroeconomic model of the UK econ- omy, using a Bayesian local likelihood methodology. This enables us to estimate a large open-economy DSGE model over a sample that comprises several different monetary pol- icy regimes and an incomplete set of data. Our estimation identifies a gradual shift to a monetary policy regime characterised by an increased responsiveness of policy towards inflation alongside a decrease in the inflation trend down to the two percent target level. The time-varying model also performs remarkably well in forecasting and delivers statis- tically significant accuracy improvements for most variables and horizons for both point and density forecasts compared to the standard fixed-parameter version.

AB - We estimate a time-varying parameter structural macroeconomic model of the UK econ- omy, using a Bayesian local likelihood methodology. This enables us to estimate a large open-economy DSGE model over a sample that comprises several different monetary pol- icy regimes and an incomplete set of data. Our estimation identifies a gradual shift to a monetary policy regime characterised by an increased responsiveness of policy towards inflation alongside a decrease in the inflation trend down to the two percent target level. The time-varying model also performs remarkably well in forecasting and delivers statis- tically significant accuracy improvements for most variables and horizons for both point and density forecasts compared to the standard fixed-parameter version.

KW - DSGE models

KW - Open economy

KW - Time varying parameters

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KW - DSGE models

KW - Open economy

KW - Time varying parameters

KW - UK economy

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JO - JOURNAL OF ECONOMIC DYNAMICS & CONTROL

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ER -

A time-varying parameter structural model of the UK economy

Abstract

Keywords

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