The Rescaled VAR Model with an Application to Mixed-Frequency Macroeconomic Forecasting

Abstract This paper introduces the rescaled representation of VAR models (R-VARs) and demonstrates its application in forecasting mixed-frequency macroeconomic data. We develop the model, illustrate how to implement it, and derive the asymptotic properties of the estimates. We show that R-VARs provide reliable estimates of the prediction error bands while maintaining the precision of the point forecasts. We illustrate these features by comparing it to a mixed-frequency Bayesian VAR model, the leading alternative in the existing literature.