Bayesian Econometrics and How to Get Rid of Those Wrong Signs
In many instances, Bayesian Econometrics offers a more natural interpretation of the results of a statistical investigation than does the sampling theory approach. Furthermore, the Bayesian approach provides a formal framework for incorporating prior information which is frequently available from economic theory. Despite these advantages of the Bayesian approach, applied econometric work has generally been dominated by the sampling theory approach. A simple regression example with one coefficient is used to describe the Bayesian approach using three different priors: a natural conjugate informative prior, a non informative prior, and a prior with inequality restrictions on the sign and possibly magnitude of the coefficient. The differences between the sampling theory and Bayesian approaches are highlighted. Some practical problems with the first two priors are suggested as possible reasons for the non adoption of the Bayesian approach; it is argued that the inequality restricted prior provides a practical and meaningful alternative which is likely to increase the appeal of the Bayesian approach. The implications are outlined of extending the simple one coefficient model to one where the error variance is unknown and then one where there is an unspecified number of coefficients. An example is provided of how to compute Bayesian inequality restricted estimates using the econometric computer program SHAZAM.
Volume (Year): 56 (1988)
Issue (Month): 01 (April)
|Contact details of provider:|| Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200|
Phone: 0409 032 338
Web page: http://www.aares.info/
More information through EDIRC
References listed on IDEAS
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.:
- White, Kenneth J, 1978. "A General Computer Program for Econometric Methods-Shazam," Econometrica, Econometric Society, vol. 46(1), pages 239-240, January.
- Zellner, Arnold, 1988. "Bayesian analysis in econometrics," Journal of Econometrics, Elsevier, vol. 37(1), pages 27-50, January.
- Geweke, John, 1986. "Exact Inference in the Inequality Constrained Normal Linear Regression Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(2), pages 127-141, April.
When requesting a correction, please mention this item's handle: RePEc:ags:remaae:9662. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.