Location of Repository

Bayesian inference in a cointegrating panel data model

By Gary Koop, Roberto Leon-Gonzalez and Rodney Strachan

Abstract

This paper develops methods of Bayesian inference in a cointegrating panel data\ud model. This model involves each cross-sectional unit having a vector error correction representation.\ud It is flexible in the sense that different cross-sectional units can have different cointegration ranks and\ud cointegration spaces. Furthermore, the parameters which characterize short-run dynamics and deterministic\ud components are allowed to vary over cross-sectional units. In addition to a noninformative\ud prior, we introduce an informative prior which allows for information about the likely location of the\ud cointegration space and about the degree of similarity in coefficients in different cross-sectional units.\ud A collapsed Gibbs sampling algorithm is developed which allows for efficient posterior inference. Our\ud methods are illustrated using real and artificial data

Topics: Bayesian, panel data cointegration, error correction model, reduced rank regression, Markov Chain Monte Carlo
Year: 2006
OAI identifier: oai:lra.le.ac.uk:2381/7433

Suggested articles

Preview

Citations

  1. (2005). A Bayesian state space approach to cointegration in panel data models. Working paper available at http://www.cide.info/conf/papers/1128.pdf.
  2. (1957). A Comment on doi
  3. (1998). A residual-based test of the null of cointegration in panel data. doi
  4. (1999). Bayes estimation of short-run coefficients in dynamic panel data models. In doi
  5. (1995). Bayes Factors. doi
  6. (2004). Bayesian analysis of the error correction model. doi
  7. (2005). Bayesian approaches to cointegration. To appear as
  8. (1999). Bayesian Inference in Dynamic Econometric Models. doi
  9. (2003). Bayesian model selection for a sharp null and a diffuse alternative with econometric applications.
  10. (2005). Bayesian point estimation of the cointegration space, forthcoming in doi
  11. (1996). Bayesian reduced rank regression in econometrics. doi
  12. (2005). Bayesian reference analysis of cointegration. doi
  13. (1998). Bayesian simultaneous equations analysis using reduced rank structures. doi
  14. (2001). Benchmark priors for Bayesian model averaging. doi
  15. (2001). Calibration of P-values for testing precise null hypotheses. doi
  16. (1995). Computing Bayes Factors using a generalization of the SavageDickey density ratio. doi
  17. (1994). Covariance structure of the Gibbs sampler with applications to comparisons of estimators and augmentation schemes. doi
  18. Dijk (2004a) Improper priors with well defined Bayes factors. Econometric Institute doi
  19. Dijk (2004b) Valuing structure, model uncertainty and model averaging in vector autoregressive processes. Econometric Institute
  20. (2005). Efficient posterior simulation for cointegrated models with priors on the cointegration space, doi
  21. (1986). Forecasting with Bayesian vector autoregressions: Five years of experience. doi
  22. (1995). Fractional Bayes factors for model comparison. doi
  23. (2002). Inflation, exchange rates and PPP in a multivariate panel cointegration model. Working paper available at http://www.riksbank.se/upload/7405/wp_145.pdf.
  24. (2003). Likelihood-based cointegration analysis in panels of vector errorcorrection models. doi
  25. (2001). Likelihood-based cointegration tests in heterogeneous panels. doi
  26. (1995). Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. doi
  27. (1996). Matrix Computations, Third edition Baltimore: John Hopkins Universty Press Groen,
  28. (2000). Nonstationary panel data analysis: An overview of some recent developments. doi
  29. (2000). Nonstationary panels, cointegration in panels and dynamic panels: A survey. doi
  30. (1954). Normal multivariate analysis and the orthogonal group. doi
  31. (1994). On the shape of the likelihood/posterior in cointegration models. doi
  32. (1991). Optimal inference in cointegrated systems. doi
  33. (2004). Panel cointegration; Asymptotic and finite sample properties of pooled time series tests with an application to the Purchasing Power Parity Hypothesis. doi
  34. (2004). Random coefficient panel data models. Working paper available at http://www.econ.cam.ac.uk/faculty/pesaran/rcm17june04.pdf.
  35. (1999). Spurious regression and residual-based tests for cointegration in panel data. doi
  36. (1991). Stochastic trends and economic fluctuations. doi
  37. (1987). Testing of a point null hypothesis: the irreconcilability of significance levels and evidence (with discussion), doi
  38. (1999). Testing symmetry and proportionality in PPP: A panel data approach. doi
  39. (1994). The collapsed Gibbs sampler with applications to a gene regulation problem. doi
  40. (1990). The matrix angular central Gaussian distribution, doi
  41. (2003). Valid Bayesian estimation of the cointegrating error correction model. doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.