Bayesian inference in cointegrated VAR models: with applications to the demand for euro area M3

Arbeitspapier

The paper considers a Bayesian approach to the cointegrated VAR model with a uniform prior on the cointegration space. Building on earlier work by Villani (2005b), where the posterior probability of the cointegration rank can be calculated conditional on the lag order, the current paper also makes it possible to compute the joint posterior probability of these two parameters as well as the marginal posterior probabilities under the assumption of a known upper bound for the lag order. When the marginal likelihood identity is used for calculating these probabilities, a point estimator of the cointegration space and the weights is required. Analytical expressions are therefore derived of the mode of the joint posterior of these parameter matrices. The procedure is applied to a money demand system for the euro area and the results are compared to those obtained from a maximum likelihood analysis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 692

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Statistical Simulation Methods: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Demand for Money
• Subject: Bayesian inference ; cointegration ; lag order ; Money demand ; vector autoregression ; Geldnachfrage ; Geldmenge ; Eurozone ; Theorie ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Warne, Anders
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/153126
• Last update: 10.03.2025, 11:44 AM CET