Hoang Nguyen: Vector autoregression models with fat tail and asymmetry
Time: Wed 2020-11-04 15.15
Location: Zoom, email organisers
Participating: Hoang Nguyen
With the uncertain changes of the economic environment, macroeconomic downturns during recessions and crises can hardly be explained by a Gaussian structural shock. There is evidence that the distribution of macroeconomic variables is fat-tailed and asymmetric. In this paper, we contribute to the literature by extending the VAR models to account for a more realistic assumption of the multivariate distribution of the macroeconomic variables. We propose a general class of Generalized Hyperbolic Skew Student’s-tdistribution with stochastic volatility(Skew-t.SV) VAR that allows us to take into account fat tails and asymmetry. The Bayesian inference using a Gibbs sampler is extended to make inferences of model parameters. We present evidence of fat tails and asymmetry for monthly macroeconomic variables. The analysis also gives a clear message that asymmetry should be taken into account to have a better prediction during recession and crisis.
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