Haroon Mumtaz , Queen Mary University of London Katerina Petrova , University of St. Andrews
November 7, 2018
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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