Forecasting and turning point predictions in a Bayesian panel VAR model

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model, which accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for hierarchical and for Minnesota-type priors. Formulas for multistep, multiunit point and average forecasts are provided. An application to the problem of forecasting the growth rate of output and of predicting turning points in the G-7 illustrates the approach. A comparison with alternative forecasting methods is also provided.