Bayesian Analysis of Weak Form Reduced Rank Structure in VEC Models
The concept of cointegration that enables the proper statistical analysis of long-run comovements between unit root processes has been of great interest to numerous economic investigators since it was introduced. However, investigation of short-run comovement between economic time series seems equally important, especially for economic decision-makers. The concept of common features and based on it the idea of two additional reduced rank structure forms in a VEC model (the strong and the weak one) may be of some help. The strong form reduced rank structure (SF) takes place when at least one linear combination of the first differences of the variables exists, which is white noise. However, when this assumption seems too strong, the weaker case can be considered. The weak form appears when the linear combination of first differences adjusted for long-run efects exists, which is white noise. The main focus of this paper is a Bayesian analysis of the VEC models involving the weak form of reduced rank restrictions. After the introduction and discussion of the said Bayesian model, the presented methods will be illustrated by an empirical investigation of the price - wage spiral in the Polish economy.
Volume (Year): 3 (2011)
Issue (Month): 3 (September)
|Contact details of provider:|| Web page: http://cejeme.org/|
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.:
- Strachan, R.W. & van Dijk, H.K., 2007.
"Bayesian model averaging in vector autoregressive processes with an investigation of stability of the US great ratios and risk of a liquidity trap in the USA, UK and Japan,"
Econometric Institute Research Papers
EI 2007-11, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Rodney Strachan & Herman K. van Dijk, . "Bayesian Model Averaging in Vector Autoregressive Processes with an Investigation of Stability of the US Great Ratios and Risk of a Liquidity Trap in the USA, UK and Japan," MRG Discussion Paper Series 1407, School of Economics, University of Queensland, Australia.
- Gary Koop & Roberto León-González & Rodney W. Strachan, 2005.
"Efficient Posterior Simulation for Cointegrated Models with Priors On the Cointegration Space,"
Discussion Papers in Economics
05/13, Department of Economics, University of Leicester, revised Apr 2006.
- Gary Koop & Roberto León-González & Rodney W. Strachan, 2010. "Efficient Posterior Simulation for Cointegrated Models with Priors on the Cointegration Space," Econometric Reviews, Taylor & Francis Journals, vol. 29(2), pages 224-242, April.
- Villani, Mattias, 2006. "Bayesian point estimation of the cointegration space," Journal of Econometrics, Elsevier, vol. 134(2), pages 645-664, October.
- Robert F. Engle & Sharon Kozicki, 1990.
"Testing For Common Features,"
NBER Technical Working Papers
0091, National Bureau of Economic Research, Inc.
- Hecq, Alain & Palm, Franz C. & Urbain, Jean-Pierre, 2006. "Common cyclical features analysis in VAR models with cointegration," Journal of Econometrics, Elsevier, vol. 132(1), pages 117-141, May.
- Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
When requesting a correction, please mention this item's handle: RePEc:psc:journl:v:3:y:2011:i:3:p:169-186. 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: (Krzysztof Osiewalski)
If references are entirely missing, you can add them using this form.