Authors: Richard K. Crump, Stefano Eusepi, Domenico Giannone, Eric Qian, and Argia M. Sbordone
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Staff Reports
A Large Bayesian VAR of the United States Economy
Number 976
August 2021
August 2021
JEL classification: C11, C32, C53, C54, E32, E37
We model the United States macroeconomic and financial sectors using a formal and unified econometric model. Through shrinkage, our Bayesian VAR provides a flexible framework for modeling the dynamics of thirty-one variables, many of which are tracked by the Federal Reserve. We show how the model can be used for understanding key features of the data, constructing counterfactual scenarios, and evaluating the macroeconomic environment both retrospectively and prospectively. Considering its breadth and versatility for policy applications, our modeling approach gives a reliable, reduced form alternative to structural models.
Author Disclosure Statement(s)
Richard K. Crump
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Stefano Eusepi, Domenico Giannone, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Stefano Eusepi
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Domenico Giannone, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Domenico Giannone
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Eric Qian
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Domenico Giannone, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Argia Sbordone
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Domenico Giannone, and Eric Qian. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Stefano Eusepi, Domenico Giannone, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Stefano Eusepi
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Domenico Giannone, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Domenico Giannone
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Eric Qian, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Eric Qian
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Domenico Giannone, and Argia Sbordone. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Argia Sbordone
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “A Large Bayesian VAR of the United States Economy,” joint with Richard Crump, Stefano Eusepi, Domenico Giannone, and Eric Qian. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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