Template-Type: ReDIF-Paper 1.0
Author-Name: de Pooter, M.D.
Author-Name-Last: de Pooter
Author-Name-First: Michiel
Author-Person: pde371
Author-Name: Ravazzolo, F.
Author-Name-Last: Ravazzolo
Author-Name-First: Francesco
Author-Person: pra286
Author-Name: Segers, R.
Author-Name-Last: Segers
Author-Name-First: René
Author-Person: pse130
Author-Name: van Dijk, H.K.
Author-Name-Last: van Dijk
Author-Name-First: Herman
Author-Person: pva325
Title: Bayesian near-boundary analysis in basic macroeconomic time series models
Abstract: Several lessons learnt from a Bayesian analysis of basic macroeconomic time series models are presented for the situation where some model parameters have substantial posterior probability near the boundary of the parameter region. This feature refers to near-instability within dynamic models, to forecasting with near-random walk models and to clustering of several economic series in a small number of groups within a data panel. Two canonical models are used: a linear regression model with autocorrelation and a simple variance components model. Several well-known time series models like unit root and error correction models and further state space and panel data models are shown to be simple generalizations of these two canonical models for the purpose of posterior inference. A Bayesian model averaging procedure is presented in order to deal with models with substantial probability both near and at the boundary of the parameter region. Analytical, graphical and empirical results using U.S. macroeconomic data, in particular on GDP growth, are presented.
Creation-Date: 2008-08-25
File-URL: https://repub.eur.nl/pub/13055/EI%20Report%202008%20-%2013.pdf
File-Format: application/pdf
Series: RePEc:ems:eureir
Number: EI 2008-13
Classification-JEL: C11, C15, C22, C23, C30
Keywords: Bayesian model averaging, Gibbs sampler, MCMC, autocorrelation, error correction models, nonstationarity, random effects panel data models, reduced rank models, state space models
Handle: RePEc:ems:eureir:13055