Bayesian Vars: A Survey of the Recent Literature with An Application to the European Monetary System

Matteo Ciccarelli and Alessandro Rebucci ()

No 2003/102, IMF Working Papers from International Monetary Fund

Abstract: This paper reviews recent advances in the specification and estimation of Bayesian Vector Autoregressive models (BVARs). After describing the Bayesian principle of estimation, we first present the methodology originally developed by Litterman (1986) and Doan et al. (1984) and review alternative priors. We then discuss extensions of the basic model and address issues in forecasting and structural analysis. An application to the estimation of a system of time-varying reaction functions for four European central banks under the European Monetary System (EMS) illustrates how some of the results previously presented may be applied in practice.

Keywords: WP; mover accent; Bayesian VAR; Gibbs sampling; Time- Varying Reaction Function; EMS; time series; estimation procedure; VAR estimation; parameter vector; sample data; data well; estimation result; law of motion; model parameter; point estimates of the population moment; point estimate; U.S. dollar; Bayesian models; Vector autoregression; Short term interest rates; Estimation techniques; Monetary systems (search for similar items in EconPapers)
Pages: 44
Date: 2003-05-01
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Citations: View citations in EconPapers (34)

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