Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded offi cial Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Ban...

We propose a new variational approximation of the joint posterior distribution log-volatility in context large Bayesian VARs. In contrast to existing approaches that are based on local approximations, proposal provides global takes into account entire support distribution. Monte Carlo study we show is over an order magnitude more accurate than alternatives. illustrate proposed methodology with ...

The impulse responses of the federal funds rate to innovations in the non-borrowed reserves are re-examined. The rolling responses reveal that, by correcting for the nonstationarity of the data and including the error correcting terms in the VARs, the liquidity effect found by Christiano et al. (1991, 1992, and 1994) is shortened from six to two months. The rolling responses also locate an outl...

I show how to estimate and identify a large-scale vector autoregression when the variables in a subset of the system are mutually independent after conditioning on a separate set of variables (diagonality), and when the conditioning variables are independent of the former subset (block exogeneity). Least squares estimation is efficient, and restrictions only on the set of common variables are s...

A parallel-in-time algorithm based on an augmented Lagrangian approach is proposed to solve four-dimensional variational (4D-Var) data assimilation problems. The assimilation window is divided into multiple sub-intervals that allows to parallelize cost function and gradient computations. Solution continuity equations across interval boundaries are added as constraints. The augmented Lagrangian ...

This paper investigates the effects of fiscal policy on the trade balance using a structural factor model. A fiscal policy shock worsens the trade balance and produces an appreciation of the domestic currency but the effects are quantitatively small. The findings match the theoretical predictions of the standard Mundell-Fleming model, although fiscal policy should not be considered one of the m...

This paper develops methods for automatic selection of variables in Bayesian vector autoregressions (VARs) using the Gibbs sampler. In particular, I provide computationally efficient algorithms for stochastic variable selection in generic linear and nonlinear models, as well as models of large dimensions. The performance of the proposed variable selection method is assessed in forecasting three...

The main substantive finding of the recent structural vector autoregression literature with a differenced specification of hours (DSVAR) is that technology shocks lead to a fall in hours. Researchers have used these results to argue that standard business cycle models in which technology shocks leads to a rise in hours should be discarded. We evaluate the DSVAR approach by asking the following:...

The COVID-19 pandemic has affected share prices of public listed companies including banking institutions. However, a bank's price is interest mainly because the systemic risk banks may produce. Using concept value-at-risk (VaR) as measure risk, this study investigates how impacted eight commercial in Malaysia. Impulse Response Functions (IRF) indicate that VaRs at probability 0.05 and 0.10 res...