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Stochastic Search Variable Selection in Vector Error Correction Models with an Application to a Model of the UK Macroeconomy

Author Info

Listed author(s):
  • Markus Jochmann

    (University of Strathclyde; The Rimini Centre for Economic Analysis)

  • Gary Koop

    ()

    (University of Strathclyde)

  • Roberto Leon-Gonzalez

    (National Graduate Institute for Policy Studies; The Rimini Centre for Economic Analysis)

  • Rodney W. Strachan

    (University of Queensland; The Rimini Centre for Economic Analysis)

Abstract

This paper develops methods for Stochastic Search Variable Selection (currently popular with regression and Vector Autoregressive models) for Vector Error Correction models where there are many possible restrictions on the cointegration space. We show how this allows the researcher to begin with a single unrestricted model and either do model selection or model averaging in an automatic and computationally efficient manner. We apply our methods to a large UK macroeconomic model.

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File URL: http://www.rcea.org/RePEc/pdf/wp44_09.pdf
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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 44_09.

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Date of creation: Jan 2009
Handle: RePEc:rim:rimwps:44_09
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Keywords: Bayesian; cointegration; model averaging; model selection; Markov chain Monte Carlo;

Other versions of this item:

Find related papers by JEL classification:
  • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

References listed on IDEAS
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  1. Giordani, Paolo & Kohn, Robert, 2008. "Efficient Bayesian Inference for Multiple Change-Point and Mixture Innovation Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 66-77, January.
  2. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  3. Jochmann, Markus & Koop, Gary & Strachan, Rodney W., 2010. "Bayesian forecasting using stochastic search variable selection in a VAR subject to breaks," International Journal of Forecasting, Elsevier, vol. 26(2), pages 326-347, April.
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Cited by:

  1. Kang, Wensheng & Ratti, Ronald A. & Yoon, Kyung Hwan, 2015. "Time-varying effect of oil market shocks on the stock market," Journal of Banking & Finance, Elsevier, vol. 61(S2), pages 150-163.
  2. Jochmann Markus & Koop Gary, 2015. "Regime-switching cointegration," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(1), pages 35-48, February.
  3. SENBETA, Sisay Regassa, 2012. "How important are external shocks in explaining growth in Sub-Saharan Africa? Evidence from a Bayesian VAR," Working Papers 2012010, University of Antwerp, Faculty of Applied Economics.
  4. Smith, Michael Stanley, 2015. "Copula modelling of dependence in multivariate time series," International Journal of Forecasting, Elsevier, vol. 31(3), pages 815-833.

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