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Characterizing economic trends by Bayesian stochastic model specifi cation search

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  • Grassi, Stefano
  • Proietti, Tommaso

Abstract

We apply a recently proposed Bayesian model selection technique, known as stochastic model specification search, for characterising the nature of the trend in macroeconomic time series. We illustrate that the methodology can be quite successfully applied to discriminate between stochastic and deterministic trends. In particular, we formulate autoregressive models with stochastic trends components and decide on whether a specific feature of the series, i.e. the underlying level and/or the rate of drift, are fixed or evolutive.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22569.

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Date of creation: 07 May 2010
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Handle: RePEc:pra:mprapa:22569

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Keywords: Bayesian model selection; stationarity; unit roots; stochastic trends; variable selection.;

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