Working Paper: CEPR ID: DP9380
Authors: Fabio Canova; Matteo Ciccarelli
Abstract: This paper provides an overview of the panel VAR models used in macroeconomics and finance. It discusses what are their distinctive features, what they are used for, and how they can be derived from economic theory. It also describes how they are estimated and how shock identification is performed, and compares panel VARs to other approaches used in the literature to deal with dynamic models involving heterogeneous units. Finally, it shows how structural time variation can be dealt with and illustrates the challenges that they present to researchers interested in studying cross-unit dynamics interdependences in heterogeneous setups.
Keywords: Bayesian methods; dynamic models; panel vector autoregression
JEL Codes: C5; E3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| panel VAR models (C23) | dynamic interdependencies (C69) |
| panel VAR models (C23) | better understanding of shocks propagation (E32) |
| idiosyncratic shocks (D89) | transmission across time and units (C22) |
| external shocks (F69) | domestic economic fluctuations (F44) |
| estimation of panel VARs (C51) | average effects across heterogeneous groups (C92) |
| government expenditure's countercyclicality (E62) | specific characteristics of units analyzed (C23) |
| panel VARs (C23) | inform policy decisions (D78) |
| international shocks (F69) | affect domestic economies (F69) |