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However, we do not follow the obvious strategy of simply modeling the VAR errors with a DPM as this would lead to computationally infeasible Bayesian inference in larger VARs and potentially a sensitivity to the way the variables are ordered in the VAR. Instead, we develop a particular additive error structure inspired by Bayesian nonparametric treatments of random effects in panel data models. We show that this leads to a model that allows for computationally fast and order\u2010invariant inference in large VARs with nonparametric shocks. Our empirical results with nonparametric VARs of various dimensions show that nonparametric treatment of the VAR errors often improves forecast accuracy and can be used to analyze the changing transmission of US monetary policy.<\/jats:p>","DOI":"10.1002\/jae.3087","type":"journal-article","created":{"date-parts":[[2024,8,7]],"date-time":"2024-08-07T09:33:47Z","timestamp":1723023227000},"page":"1301-1320","update-policy":"https:\/\/doi.org\/10.1002\/crossmark_policy","source":"Crossref","is-referenced-by-count":5,"title":["Fast and order\u2010invariant inference in Bayesian VARs with nonparametric shocks"],"prefix":"10.1002","volume":"39","author":[{"ORCID":"https:\/\/orcid.org\/0000-0002-2896-7921","authenticated-orcid":false,"given":"Florian","family":"Huber","sequence":"first","affiliation":[{"name":"Department of Economics University of Salzburg  Salzburg Austria"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"ORCID":"https:\/\/orcid.org\/0000-0002-6091-378X","authenticated-orcid":false,"given":"Gary","family":"Koop","sequence":"additional","affiliation":[{"name":"Department of Economics University of Strathclyde  Glasgow UK"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2024,8,7]]},"reference":[{"key":"e_1_2_9_2_1","doi-asserted-by":"publisher","DOI":"10.1162\/REST_a_00646"},{"key":"e_1_2_9_3_1","doi-asserted-by":"publisher","DOI":"10.1016\/j.jeconom.2022.04.013"},{"issue":"1","key":"e_1_2_9_4_1","first-page":"387","article-title":"Measuring the effects of monetary policy: A factor\u2010augmented vector autoregressive (FAVAR) approach","volume":"120","author":"Bernanke B. 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