Uniform Priors for Impulse Responses

Jonas E. Arias, Juan F Rubio-Ramirez and Daniel Waggoner
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Jonas E. Arias: https://www.philadelphiafed.org/our-people/jonas-arias

No 2023-13, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: There has been a call for caution when using the conventional method for Bayesian inference in set-identified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for individual impulse responses or other quantity of interest. This paper challenges this call by formally showing that, when the focus is on joint inference, the uniform prior over the set of orthogonal matrices is not only sufficient but also necessary for inference based on a uniform joint prior distribution over the identified set for the vector of impulse responses. In addition, we show how to use the conventional method to conduct inference based on a uniform joint prior distribution for the vector of impulse responses. We generalize our results to vectors of objects of interest beyond impulse responses.

Keywords: Bayesian; SVARs; uniform prior; sign restrictions (search for similar items in EconPapers)
JEL-codes: C11 C33 E47 (search for similar items in EconPapers)
Pages: 37
Date: 2023-09-28
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (4)

Published in 2023

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Related works:
Working Paper: Uniform Priors for Impulse Responses (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:96956

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DOI: 10.29338/wp2023-13

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