Picture of two heads

Open Access research that challenges the mind...

The Strathprints institutional repository is a digital archive of University of Strathclyde research outputs. Strathprints provides access to thousands of Open Access research papers by University of Strathclyde researchers, including those from the School of Psychological Sciences & Health - but also papers by researchers based within the Faculties of Science, Engineering, Humanities & Social Sciences, and from the Strathclyde Business School.

Discover more...

Bayesian inference in a cointegrating panel data model

Koop, G.M. and Leon-Gonzalez, Roberto and Strachan, Rodney W. (2008) Bayesian inference in a cointegrating panel data model. Advances in Econometrics, 23. pp. 433-469. ISSN 0731-9053

[img]
Preview
PDF (strathprints007742.pdf)
strathprints007742.pdf

Download (428kB) | Preview

Abstract

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