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Bayesian Vector Autoregressions

Tomasz Woźniak ()

Australian Economic Review, 2016, vol. 49, issue 3, 365-380

Abstract: type="main" xml:lang="en">

This article provides an introduction to the burgeoning academic literature on Bayesian vector autoregressions, benchmark models for applied macroeconomic research. I first explain Bayes’ theorem and the derivation of the closed-form solution for the posterior distribution of the parameters of the model's given data. I further consider parameter shrinkage, a distinguishing feature of the prior distributions commonly employed in the analysis of large data. Finally, I describe the mechanisms that enable feasible computations for these linear models that efficiently extract the information content of many variables for economic forecasting and other applications.

Date: 2016
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Australian Economic Review is currently edited by Ross Williams, Ian McDonald and Mark Wooden

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