Forecasting economic policy uncertainty of BRIC countries using Bayesian VARs

This paper utilizes the recently developed methods of compressing the parameters and the data for a high-dimensional vector autoregression (VAR) to forecast economic policy uncertainty (EPU) of Brazil, China, India and Russia (BRIC) based on EPUs of additional 18 developed and developing countries....

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Bibliographic Details
Published inEconomics letters Vol. 186; p. 108677
Main Authors Gupta, Rangan, Sun, Xiaojin
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.01.2020
Elsevier Science Ltd
Subjects
Bayesian analysis
Bayesian methods
BRIC countries
Developing countries
Economic policy
Economic policy uncertainty
Forecasting
LDCs
Spillover effect
Uncertainty
VAR
Brazil
China
India
Russia
C53
C11
C55
C32
Economic policy uncertainty
Bayesian methods
VAR
BRIC countries
E60
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Summary:This paper utilizes the recently developed methods of compressing the parameters and the data for a high-dimensional vector autoregression (VAR) to forecast economic policy uncertainty (EPU) of Brazil, China, India and Russia (BRIC) based on EPUs of additional 18 developed and developing countries. In line with the recent literature on spillover of EPUs across countries, we show that incorporating information of EPUs of other countries does indeed produce gains in forecasting the EPU of the BRIC bloc, irrespective of whether we compress the parameters or the data. •We forecast EPUs of BRIC countries using high-dimensional Bayesian VARs.•Prior shrinkage and data compression methods are used.•Results support the spillover of EPUs across countries.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2019.108677