Big Data Revolutionizes Macroeconomics with Bayesian Methods for Accurate Predictions
Bayesian methods are popular in macroeconomics with Big Data. They help overcome problems in traditional methods by using prior shrinkage or model averaging. The paper discusses how these methods work in single and multiple equation models, as well as handling changes in parameters. An example shows how Bayesian methods can handle these challenges in a large multi-country study with 133 variables.