Economic policy decisions are often informed by empirical economic analysis. While the decision-maker is usually only interested in good estimates of outcomes, the analyst is interested in estimating the model. Accurate inference on the structural features of a model, such as cointegration, can improve policy analysis as it can improve estimation, inference and forecast efficiency from using that model. However, using a model does not guarantee good estimates of the object of interest and, as it assigns a probability of one to a model and zero to near-by models, takes extreme zero-one account of the ‘weight of evidence’ in the data and the researcher’s uncertainty. By using the uncertainty associated with the structural features in a model set, one obtains policy analysis that is not conditional on the structure of the model and can improve efficiency if the features are appropriately weighted. In this paper tools are presented to allow for unconditional inference on the vector autoregressive (VAR) model. In particular, we employ measures on manifolds to elicit priors on subspaces defined by particular features of the VAR model. The features considered are cointegration, exogeneity, deterministic processes and overidentification. Two applications - money demand in Australia, and a macroeconomic model of the UK proposed by Garratt, Lee, Persaran, and Shin (2002) are used to illustrate the feasibility of the proposed methods.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number
KERP 2004/02.
Length: 37 pages Date of creation: Jan 2004 Date of revision: Handle: RePEc:kee:kerpuk:2004/02
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom Phone: +44 (0)1782 584581 Fax: +44 (0)1782 717577 Email: Web page: http://www.keele.ac.uk/depts/ec/cer/ More information through EDIRC
Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom Email: Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm
For technical questions regarding this item, or to correct its listing, contact: (Martin E. Diedrich).
Find related papers by JEL classification: C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)