New prior speeds up large-scale economic analysis, revolutionizing forecasting accuracy.
Large Bayesian VARs are commonly used in economics, but the usual prior limits flexibility. A new prior has been developed that allows for more flexibility in modeling while still providing useful analytical results. This new prior also allows for fast posterior simulation, making the process quicker and more efficient. The researchers demonstrated the effectiveness of the new prior in a structural analysis using a 15-variable VAR with sign restrictions to identify 5 structural shocks.