Bayesian inference in a time varying cointegration model

Gary Koop, Roberto Leon-Gonzalez and Rodney Strachan

Journal of Econometrics, 2011, vol. 165, issue 2, 210-220

Abstract: 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 a new time varying parameter model which permits cointegration. We use a specification 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 the Fisher effect.

Keywords: Bayesian; Time varying cointegration; Error correction model; Reduced rank regression; Markov Chain Monte Carlo (search for similar items in EconPapers)
JEL-codes: C11 C32 C33 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Related works:
Working Paper: Bayesian Inference in a Time Varying Cointegration Model (2011)
Working Paper: Bayesian Inference in the Time Varying Cointegration Model* (2011)
Working Paper: Bayesian Inference in the Time Varying Cointegration Model (2008)
Working Paper: Bayesian Inference in the Time Varying Cointegration Model (2008)
Working Paper: Bayesian Inference in the Time Varying Cointegration Model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:165:y:2011:i:2:p:210-220

DOI: 10.1016/j.jeconom.2011.07.007

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