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Strathprints serves world leading Open Access research by the University of Strathclyde, including research by the Strathclyde Institute of Pharmacy and Biomedical Sciences (SIPBS), where research centres such as the Industrial Biotechnology Innovation Centre (IBioIC), the Cancer Research UK Formulation Unit, SeaBioTech and the Centre for Biophotonics are based.

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Bayesian Multivariate Time Series Methods for Empirical Macroeconomics

Koop, Gary and Korobilis, D. (2010) Bayesian Multivariate Time Series Methods for Empirical Macroeconomics. Foundations and Trends in Econometrics, 3 (4). pp. 267-358. ISSN 1551-3076

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Abstract

Macroeconomic practitioners frequently work with multivariate time series models such as VARs, factor augmented VARs as well as timevarying parameter versions of these models (including variants with multivariate stochastic volatility). These models have a large number of parameters and, thus, over-parameterization problems may arise. Bayesian methods have become increasingly popular as a way of overcoming these problems. In this monograph, we discuss VARs, factor augmented VARs and time-varying parameter extensions and show how Bayesian inference proceeds. Apart from the simplest of VARs, Bayesian inference requires the use of Markov chain Monte Carlo methods developed for state space models and we describe these algorithms. The focus is on the empirical macroeconomist and we offer advice on how to use these models and methods in practice and include empirical illustrations. A website provides Matlab code for carrying out Bayesian inference in these models.