English, Article, Journal or magazine article edition: Bayesian Inference in the Time Varying Cointegration Model Gary Koop; Roberto Leon-Gonzalez; Rodney W. Strachan

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Bookmark: http://trove.nla.gov.au/version/145202
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Bayesian Inference in the Time Varying Cointegration Model
Author
  • Gary Koop
  • Roberto Leon-Gonzalez
  • Rodney W. Strachan
Physical Description
  • preprint
Notes
  • There are both theoretical and empirical reasons for believing that the parameters of macroeconomic models may vary over time. However, work with time-varying parameter models has largely involved Vector autoregressions (VARs), ignoring cointegration. This is despite the fact that cointegration plays an important role in informing macroeconomists on a range of issues. In this paper we develop time varying parameter models which permit cointegration. Time-varying parameter VARs (TVP-VARs) typically use state space representations to model the evolution of parameters. In this paper, we show that it is not sensible to use straightforward extensions of TVP-VARs when allowing for cointegration. Instead we develop a specication which allows for the cointegrating space to evolve over time in a manner comparable to the random walk variation used with TVP-VARs. The properties of our approach are investigated before developing a method of posterior simulation. We use our methods in an empirical investigation involving a permanent/​transitory variance decomposition for ination.
  • Bayesian, time varying cointegration, error correctionmodel, reduced rank regression, Markov Chain Monte Carlo.
  • RePEc:rim:rimwps:23-08
Language
  • English
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