Empirical Applications of the Interacted Panel VAR Model

The Vector Autoregressive (VAR) Models can be considered as a dynamic multivariate extension of the univariate autoregressive models. This family of models has become very popular in macroeconomics analysis after the work of Sims(1980) and they are widely used in time series literature thanks to their flexibility. As a matter of fact, by setting appropriately a VAR model, we can describe efficiently the dynamics of the economy and provide quite accurate forecasts. During recent years, researchers developed different VAR models with the purpose to represent better the data generating process. Among these, the nonlinear VAR models have gained a central role in macroeconometric analysis in testing the theory, due to their capacity to capture a richer set of dynamics regarding current macroeconomic phenomenons. Depending on the specific model, they can allow, for example, different states (regimes) of the world, to allow the coefficients of the model to vary over time in each time unit, allowing for interactions between variables potentially revealing important information. .. [edited by Author]