Does it add up? Reconciling forecasts and Impulse responses for hierarchical macroeconomic data
Regional forecasts should add up to the national forecast. In reality they often don’t as each region makes their own forecasts. Also in structural analyses, regional shock responses can drift so far apart from the national response that the numbers no longer add up at all.
Aug 27, 2026
Improving inference and forecasting in VAR models using cross-sectional information
Macroeconomic time series are short, so estimating a individual VARs for many country runs the risk of overfitting and imprecise inference. The standard remedy — the Minnesota prior — shrinks all coefficients towards zero. But this ignores a valuable source of information: many countries exhibit similar dynamics, at least for some variables. Euro area member states, for example, share a common monetary policy, so interest rates and inflation dynamics are strongly integrated, while labour markets and industry structures are very different.
Jan 27, 2026