No. 875: Changing impact of shocks: a time-varying proxy SVAR approach
Haroon Mumtaz Queen Mary University of London Katerina Petrova University of St. Andrews
November 7, 2018
Abstract
In this paper we extend the Bayesian Proxy VAR to incorporate time variation in the parameters. A Gibbs sampling algorithm is provided to approximate the posterior distributions of the model's parameters. Using the proposed algorithm, we estimate the time-varying effects of taxation shocks in the US and show that there is limited evidence for a structural change in the tax multiplier.
J.E.L classification codes: C2,C11, E3
Keywords: Time-Varying parameters, Stochastic volatility, Proxy VAR, tax shocks