Inducing Sparsity and Shrinkage in Time-Varying Parameter Models

📝 Original Info

• Title: Inducing Sparsity and Shrinkage in Time-Varying Parameter Models
• ArXiv ID: 1905.10787
• Date: 2019-12-18
• Authors: Florian Huber, Gary Koop, Luca Onorante

📝 Abstract

Time-varying parameter (TVP) models have the potential to be over-parameterized, particularly when the number of variables in the model is large. Global-local priors are increasingly used to induce shrinkage in such models. But the estimates produced by these priors can still have appreciable uncertainty. Sparsification has the potential to reduce this uncertainty and improve forecasts. In this paper, we develop computationally simple methods which both shrink and sparsify TVP models. In a simulated data exercise we show the benefits of our shrink-then-sparsify approach in a variety of sparse and dense TVP regressions. In a macroeconomic forecasting exercise, we find our approach to substantially improve forecast performance relative to shrinkage alone.

📄 Full Content

...(본문 내용이 길어 생략되었습니다. 사이트에서 전문을 확인해 주세요.)