Structural Error Correction Model: A Bayesian Perspective

Chew Chua and Peter Summers

No 702, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: This paper proposes a Structural Error Correction Model (SECM) that allows concurrent estimation of the structural parameters and analysis of cointegration. We amalgamate the Bayesian methods of Kleibergen and Paap (2002) for analysis of cointegration in the ECM, and the Bayesian methods of Waggoner and Zha (2003) for estimating the structural parameters in BSVAR into our proposed model. Empirically, we apply the SCEM to four data generating processes, each with a different number of cointegrating vector. The results show that in each of the DGPs, the Bayes factors are able to select the appropriate cointegrating vectors and the estimated marginal posterior parameters’ pdfs cover the actual values. Key words: structural error correction model

Keywords: structural error correction model; cointegration; Bayesian; structural parameters; singular value decomposition. (search for similar items in EconPapers)
JEL-codes: C11 C15 C32 C52 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ecm and nep-ets
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