Computationally efficient inference in large Bayesian mixed frequency VARs

Mixed frequency Vector Autoregressions (MF-VARs) can be used to provide timely and high frequency estimates or nowcasts of variables for which data is available at a low frequency. Bayesian methods are commonly used with MF-VARs to overcome over-parameterization concerns. But Bayesian methods typically rely on computationally demanding Markov Chain Monte Carlo (MCMC) methods. In this paper, we develop Variational Bayes (VB) methods for use with MF-VARs using Dirichlet–Laplace global–local shrinkage priors. We show that these methods are accurate and computationally much more efficient than MCMC in two empirical applications involving large MF-VARs.