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Monetary Policy Analysis in a Small Open Economy using Bayesian Cointegrated Structural VARs

  • Villani, Mattias


    (Research Department, Central Bank of Sweden)

  • Warne, Anders



Structural VARs have been extensively used in empirical macroeconomics during the last two decades, particularly in analyses of monetary policy. Existing Bayesian procedures for structural VARs are at best confined to a severly limited handling of cointegration restrictions. This paper extends the Bayesian analysis of structural VARs to cover cointegrated processes with an arbitrary number of cointegrating relations and general linear restrictions on the cointegration space. A reference prior distribution with an optional small open economy effect is proposed and a Gibbs sampler is derived for a straight-forward evaluation of the posterior distribution. The methods are used to analyze the e.ects of monetary policy in Sweden.

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Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 156.

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Length: 23 pages
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:hhs:rbnkwp:0156
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Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Phone: 08 - 787 00 00
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