A time-varying parameter structural model of the UK economy
MetadataShow full item record
We estimate a time-varying parameter structural macroeconomic model of the UK economy, 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 policy 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 statistically significant accuracy improvements for most variables and horizons for both point and density forecasts compared to the standard fixed-parameter version.
Kapetanios , G , Masolo , R M , Petrova , K & Waldron , M 2019 , ' A time-varying parameter structural model of the UK economy ' , Journal of Economic Dynamics and Control , vol. 106 , 103705 . https://doi.org/10.1016/j.jedc.2019.05.012
Journal of Economic Dynamics and Control
Copyright Crown Copyright © 2019 Published by Elsevier B.V. All rights reserved. This work has been made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1016/j.jedc.2019.05.012
DescriptionKaterina Petrova acknowledges support by the Alan Turing Institute under the EPSRC grant EP/N510129/1.
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.