A New Perspective of the Meese-Rogoff Puzzle: Application of Sparse Dynamic Shrinkage

Zheng Fan, Worapree Maneesoonthorn, Yong Song

We propose the Markov Switching Dynamic Shrinkage process (MSDSP), nesting the Dynamic Shrinkage Process (DSP) of Kowal et al. (2019). We revisit the Meese-Rogoff puzzle (Meese and…