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Bayesian inference in a time varying cointegration model

Koop, Gary and Leon-Gonzalez, Roberto and Strachan, Rodney (2011) Bayesian inference in a time varying cointegration model. Journal of Econometrics, 165 (2). pp. 210-220. ISSN 0304-4076

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Abstract

There are both theoretical and empirical reasons for believing that the parameters of macroeconomic models may vary over time. However, work with time-varying parameter models has largely involved vector autoregressions (VARs), ignoring cointegration. This is despite the fact that cointegration plays an important role in informing macroeconomists on a range of issues. In this paper, we develop a new time varying parameter model which permits cointegration. We use a specification which allows for the cointegrating space to evolve over time in a manner comparable to the random walk variation used with TVP–VARs. The properties of our approach are investigated before developing a method of posterior simulation. We use our methods in an empirical investigation involving the Fisher effect.

Item type: Article
ID code: 35548
Keywords: Bayesian, time varying cointegration, error correction model, reduced rank regression, Markov chain Monte Carlo, Economic Theory, History and Philosophy of Science, Economics and Econometrics, Applied Mathematics
Subjects: Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Depositing user: Pure Administrator
Date deposited: 02 Nov 2011 13:52
Last modified: 18 Aug 2017 05:11
URI: https://strathprints.strath.ac.uk/id/eprint/35548
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