Hello everyone. I hope you are doing well.
I am sorry as I am going to ask this question which is not necessarily related to Dynare or DSGE modeling. I am trying to study the impacts of uncertainty shocks using the TVP-VAR model with stochastic volatility. For that purpose, I borrow codes from Professor Mumtaz’s website. I have attached the code. My main confusion with the use of the model to study uncertainty shocks comes from my inability to understand the following point:
a. Do we need to use a proxy of uncertainty like VXO or EPUI in order to study uncertainty shocks? As far as I understand, time-varying models themselves calculate volatility time-series based on the data we provide. For instance, Professor Mumtaz calculates volatility from the model in this paper: Dynamic Impacts of Uncertainty Shocks in the US Economy.
However, I also found some papers like this one: Time Varying Uncertainty Impacts on Chinese Economy where the authors use uncertainty proxies to study uncertainty impacts on the Chinese economy.
I will be more than happy if you could help me overcome this confusion on the basic question.
Thank you very much for your time and help.
TVPVARR.zip (54.8 KB)