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VAR Models with Fat Tails and Dynamic Asymmetry
Örebro University, Örebro University School of Business.ORCID iD: 0000-0001-8124-328x
Örebro University, Örebro University School of Business.ORCID iD: 0000-0002-1395-9427
Department of Management and Engineering, Linköping University, Linköping, Sweden.
Örebro University, Örebro University School of Business. National Institute of Economic Research, Stockholm, Sweden.ORCID iD: 0000-0002-4840-7649
2025 (English)In: Recent Developments in Bayesian Econometrics and Their Applications: Festschrift in Honour of Sune Karlsson / [ed] Stepan Mazur; Pär Österholm, Cham: Springer, 2025, p. 67-88Chapter in book (Refereed)
Abstract [en]

In this chapter, we extend the standard Gaussian stochastic volatility Bayesian VAR by employing the generalized hyperbolic skew Student’s t distribution for the innovations. Allowing the skewness parameter to vary over time, our specification permits flexible modelling of innovations in terms of both fat tails and—potentially dynamic—asymmetry. In an empirical application using US data on industrial production, consumer prices and economic policy uncertainty, we find support—although to a moderate extent—for time-varying skewness. In addition, we find that shocks to economic policy uncertainty have a negative effect on both industrial production growth and CPI inflation.

Place, publisher, year, edition, pages
Cham: Springer, 2025. p. 67-88
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Probability Theory and Statistics Economics
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URN: urn:nbn:se:oru:diva-124871DOI: 10.1007/978-3-032-00110-8_5ISBN: 9783032001092 (print)ISBN: 9783032001122 (print)ISBN: 9783032001108 (electronic)OAI: oai:DiVA.org:oru-124871DiVA, id: diva2:2012568
Available from: 2025-11-10 Created: 2025-11-10 Last updated: 2025-11-10Bibliographically approved

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Kiss, TamásMazur, StepanÖsterholm, Pär

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