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Empirical · Model class
Joint dynamics across a small macro system so output, inflation, rates, and labor can move together inside one shared read.
What this class is for
Use this class when one series is not enough -- when the question is about how a small group of macro variables co-move and respond to shocks.
Models in this class
Each model below has its own reference page with overview, graph, proof, and comparison material.
Vector autoregression -- a small system where each macro variable is regressed on lags of itself and the other variables in the system.
Best for: Studying short-run co-movement and forecasting a small group of macro series jointly without imposing structural restrictions.
Bayesian shrinkage on a vector autoregression -- Minnesota-style priors stabilize forecasts for medium-sized macro systems.
Best for: Forecasting a medium-sized macro system where unrestricted VAR is too noisy and shrinkage materially improves out-of-sample reads.
Vector error-correction model -- for cointegrated macro series where long-run equilibrium relationships pull the system back.
Best for: Variables that move together over the long run but drift in the short run -- VECM keeps the cointegration structure explicit.