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Bayesian Multivariate Time Series Methods for Empirical Macroeconomics

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  • Koop, Gary
  • Korobilis, Dimitris

Abstract

Macroeconomic practitioners frequently work with multivariate time series models such as VARs, factor augmented VARs as well as time-varying parameter versions of these models (including variants with multivariate stochastic volatility). These models have a large number of parameters and, thus, over-parameterization problems may arise. Bayesian methods have become increasingly popular as a way of overcoming these problems. In this monograph, we discuss VARs, factor augmented VARs and time-varying parameter extensions and show how Bayesian inference proceeds. Apart from the simplest of VARs, Bayesian inference requires the use of Markov chain Monte Carlo methods developed for state space models and we describe these algorithms. The focus is on the empirical macroeconomist and we offer advice on how to use these models and methods in practice and include empirical illustrations. A website provides Matlab code for carrying out Bayesian inference in these models.

Suggested Citation

  • Koop, Gary & Korobilis, Dimitris, 2010. "Bayesian Multivariate Time Series Methods for Empirical Macroeconomics," Foundations and Trends(R) in Econometrics, now publishers, vol. 3(4), pages 267-358, July.
  • Handle: RePEc:now:fnteco:0800000013
    DOI: 10.1561/0800000013
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    More about this item

    Keywords

    Multivariate time series models; Bayesian methods; VARs; Empirical macroeconomics; Econometrics; Macroeconomics; Finance;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E0 - Macroeconomics and Monetary Economics - - General

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