On the Practice of Bayesian Inference in Basic Economic Time Series Models using Gibbs Sampling

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On the Practice of Bayesian Inference in Basic Economic Time Series Models using Gibbs Sampling

Author Info

Michiel D. de Pooter () (Faculty of Economics, Erasmus Universiteit Rotterdam)
René Segers () (Faculty of Economics, Erasmus Universiteit Rotterdam)
Herman K. van Dijk () (Faculty of Economics, Erasmus Universiteit Rotterdam)

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Abstract

Several lessons learned from a Bayesian analysis of basic economic time series models by means of the Gibbs sampling algorithm are presented. Models include the Cochrane-Orcutt model for serial correlation, the Koyck distributed lag model, the Unit Root model, the Instrumental Variables model and as Hierarchical Linear Mixed Models, the State-Space model and the Panel Data model. We discuss issues involved when drawing Bayesian inference on regression parameters and variance components, in particular when some parameter have substantial posterior probability near the boundary of the parameter region, and show that one should carefully scan the shape of the posterior density function. Analytical, graphical and empirical results are used along the way.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-076/4.

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Date of creation: 31 Aug 2006
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Handle: RePEc:dgr:uvatin:20060076

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Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-09-16 (All new papers)
NEP-ECM-2006-09-16 (Econometrics)
NEP-ETS-2006-09-16 (Econometric Time Series)
NEP-KNM-2006-09-16 (Knowledge Management & Knowledge Economy)

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Other versions:
- Gary Koop & Herman K. van Dijk, 1999. "Testing for Integration using Evolving Trend and Seasonals Models: A Bayesian Approach," Tinbergen Institute Discussion Papers 99-072/4, Tinbergen Institute. [Downloadable!]
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Other versions:
- Herman K. van Dijk, 1998. "Some Remarks on the Simulation Revolution in Bayesian Econometric Inference," Tinbergen Institute Discussion Papers 98-117/4, Tinbergen Institute.
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Other versions:
- Kleibergen, F. & Van Dijk, H.K., 1997. "Bayesian Simultaneous Equations Analysis Using Reduced Rank Structures," Papers 9714/a, Erasmus University of Rotterdam - Econometric Institute.
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Other versions:
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repec:cup:etheor:v:12:y:1996:i:3:p:409-31 is not listed on IDEAS
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