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Monetary policy analysis in a small open economy using Bayesian cointegrated structural VARs

Anders Warne and Mattias Villani

No 296, Working Paper Series from European Central Bank

Abstract: Structural VARs have been extensively used in empirical macroeconomics during the last two decades, particularly in analyses of monetary policy. Existing Bayesian procedures for structural VARs are at best confined to a severly limited handling of cointegration restrictions. This paper extends the Bayesian analysis of structural VARs to cover cointegrated processes with an arbitrary number of cointegrating relations and general linear restrictions on the cointegration space. A reference prior distribution with an optional small open economy effect is proposed and a Gibbs sampler is derived for a straightforward evaluation of the posterior distribution. The methods are used to analyze the effects of monetary policy in Sweden. JEL Classification: C11, C32, E52

Keywords: Counterfactual experiments; Impulse responses; monetary policy; Structural; vector autoregression (search for similar items in EconPapers)
Date: 2003-12
Note: 563011
References: View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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