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Deviance Information Criterion for Comparing VAR Models

In: Essays in Honor of Peter C. B. Phillips

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  • Tao Zeng
  • Yong Li
  • Jun Yu

Abstract

Vector Autoregression (VAR) has been a standard empirical tool used in macroeconomics and finance. In this paper we discuss how to compare alternative VAR models after they are estimated by Bayesian MCMC methods. In particular we apply a robust version of deviance information criterion (RDIC) recently developed inLi, Zeng, and Yu (2014b)to determine the best candidate model. RDIC is a better information criterion than the widely used deviance information criterion (DIC) when latent variables are involved in candidate models. Empirical analysis using US data shows that the optimal model selected by RDIC can be different from that by DIC.

Suggested Citation

  • Tao Zeng & Yong Li & Jun Yu, 2014. "Deviance Information Criterion for Comparing VAR Models," Advances in Econometrics, in: Essays in Honor of Peter C. B. Phillips, volume 33, pages 615-637, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-905320140000033017
    DOI: 10.1108/S0731-905320140000033017
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    More about this item

    Keywords

    Bayes factor; DIC; VAR models; Markov Chain Monte Carlo; C11; C12; G12;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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