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The Strathprints institutional repository is a digital archive of University of Strathclyde's Open Access research outputs. Strathprints provides access to thousands of Open Access research papers by University of Strathclyde researchers, including by researchers from the Department of Computer & Information Sciences involved in mathematically structured programming, similarity and metric search, computer security, software systems, combinatronics and digital health.

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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.