The Value of Structural Information in the VAR Model
AbstractEconomic 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 InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper 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:
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
Web page: http://www.keele.ac.uk/depts/ec/cer/
More information through EDIRC
Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
Other versions of this item:
- Rodney W. Strachan & Herman K. van Dijk, 2004. "The Value of Structural Information in the VAR Model," Econometric Society 2004 North American Summer Meetings 45, Econometric Society.
- Strachan, R.W. & van Dijk, H.K., 2003. "The value of structural information in the VAR model," Econometric Institute Research Papers EI 2003-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gary Koop & Simon M. Potter & Rodney W. Strachan, 2008.
"Re-Examining the Consumption-Wealth Relationship: The Role of Model Uncertainty,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 40(2-3), pages 341-367, 03.
- Gary Koop & Simon M. Potter & Rodney W. Strachan, 2005. "Reexamining the consumption-wealth relationship: the role of model uncertainty," Staff Reports 202, Federal Reserve Bank of New York.
- Gary Koop & Simon M. Potter & Rodney W. Strachan, 2005. "Re-examining the Consumption-Wealth Relationship: The Role of Model Uncertainty," Discussion Papers in Economics 05/3, Department of Economics, University of Leicester.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin E. Diedrich) The email address of this maintainer does not seem to be valid anymore. Please ask Martin E. Diedrich to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.