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Tobit Bayesian Model Averaging and the Determinants of Foreign Direct Investment

By Alexander Jordan and Alex Lenkoski

Abstract

We develop a fully Bayesian, computationally efficient framework for incorporating model uncertainty into Type II Tobit models and apply this to the investigation of the determinants of Foreign Direct Investment (FDI). While direct evaluation of modelprobabilities is intractable in this setting, we show that by using conditional Bayes Factors, which nest model moves inside a Gibbs sampler, we are able to incorporate model uncertainty in a straight-forward fashion. We conclude with a study of global FDI flows between 1988-2000

Topics: Statistics - Applications, Quantitative Finance - General Finance
Year: 2012
OAI identifier: oai:arXiv.org:1205.2501

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