Bayesian VAR forecasts, survey information, and structural change in the euro area

We incorporate external information extracted from the European Central Bank’s Survey of Professional Forecasters into predictions a Bayesian VAR using entropic tilting and soft conditioning. The resulting conditional forecasts significantly improve plain BVAR point density forecasts. Importantly, we do not restrict at specific quarterly horizon but their possible paths over several horizons jointly since survey comes in form one- two-year-ahead expectations. As well as improving accuracy variable that target, spillover effects on “other-than-targeted” variables are relevant size statistically significant. document baseline exhibits an upward bias for GDP growth after financial crisis, our results provide evidence can help mitigate structural breaks forecasting performance popular macroeconometric model.