A Bayesian Markov-switching SAR model for time-varying cross-price spillovers
Applications
2023-10-31 v1 Econometrics
Abstract
The spatial autoregressive (SAR) model is extended by introducing a Markov switching dynamics for the weight matrix and spatial autoregressive parameter. The framework enables the identification of regime-specific connectivity patterns and strengths and the study of the spatiotemporal propagation of shocks in a system with a time-varying spatial multiplier matrix. The proposed model is applied to disaggregated CPI data from 15 EU countries to examine cross-price dependencies. The analysis identifies distinct connectivity structures and spatial weights across the states, which capture shifts in consumer behaviour, with marked cross-country differences in the spillover from one price category to another.
Keywords
Cite
@article{arxiv.2310.19557,
title = {A Bayesian Markov-switching SAR model for time-varying cross-price spillovers},
author = {Christian Glocker and Matteo Iacopini and Tamás Krisztin and Philipp Piribauer},
journal= {arXiv preprint arXiv:2310.19557},
year = {2023}
}