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.

ORCID iDs

Koop, Gary ORCID logoORCID: https://orcid.org/0000-0002-6091-378X, Leon-Gonzalez, Roberto and Strachan, Rodney;
  • Item type:Article
    ID code:35548
    Dates:
    Date
    Event
    December 2011
    Published
    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 Jun 2021 03:14
    URI:https://strathprints.strath.ac.uk/id/eprint/35548
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