Large Bayesian VARs are now widely used in empirical macroeconomics. One popular shrinkage prior this setting is the natural conjugate as it facilitates posterior simulation and leads to a range of useful analytical results. This is, however, at expense modeling flexibility, rules out cross?variable shrinkage, that shrinking coefficients on lags other variables more aggressively than those own ...

The general pattern of estimated volatilities of macroeconomic and financial variables is often broadly similar. We propose two models in which conditional volatilities feature comovement and study them using U.S. macroeconomic data. The first model specifies the conditional volatilities as driven by a single common unobserved factor, plus an idiosyncratic component. We label this model BVAR wi...

Much of the conventional wisdom stems from Friedman’s (1968a; 1968b) informal discussions and Cagan’s (1972) reduced-form evidence on how nominal interest rates respond to a permanent change in money growth. According to that wisdom, the interest rate response is broken into a “short-run,” a “medium-run,” and a “long-run” response. In the short run, when wages, prices, and portfolios do not adj...

Large Bayesian vector autoregressions with various forms of stochastic volatility have become increasingly popular in empirical macroeconomics. One main difficulty for practitioners is to choose the most suitable specification their particular application. We develop model comparison methods–based on marginal likelihood estimators that combine conditional Monte Carlo and adaptive importance sam...