Bayesian Analysis of Time-Varying Parameter Vector Autoregressive Model with the Ordering of Variables for the Japanese Economy and Monetary Policy

Jouchi Nakajima and Toshiaki Watanabe

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper applies the time-varying parameter vector autoregressive model to the Japanese economy. The both parameters and volatilities, which are assumed to follow a random-walk process, are estimated using a Bayesian method with MCMC. The recursive structure is assumed for identification and the reversible jump MCMC is used for the ordering of variables. The empirical result reveals the time-varying structure of the Japanese economy and monetary policy during the period from 1981 to 2008 and provides evidence that the order of variables may change by the introduction of zero interest rate policy.

Keywords: Bayesian inference; Monetary policy; Reversible jump Markov chain Monte Carlo; Stochastic volatility; Time-varying parameter VAR (search for similar items in EconPapers)
JEL-codes: C11 C15 E52 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-mon
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Citations: View citations in EconPapers (85)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:ghsdps:gd11-196

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