Rare Events and Risk Perception: Evidence from Fukushima Accident

Tomasz Wozniak ()
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Tomasz Wozniak: University of Melbourne, http://findanexpert.unimelb.edu.au/display/person426516

Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This article provides an introduction to the burgeoning academic literature on Bayesian Vector Autoregressions, benchmark models for applied macroeconomic research. We first explain Bayes’ theorem and the derivation of the closed-form solution for the posterior distribution of the parameters of the model given data. We further consider parameter shrinkage, a distinguishing feature of the prior distributions commonly employed in the analysis of large datasets, as well as an alternative way of specifying the prior distribution using dummy observations. Finally, we describe the mechanisms that enable feasible computations for these linear models that efficiently extract the information content of many variables for economic forecasting and other applications.

Keywords: Bayes’ Theorem; Natural-Conjugate Analysis; Dummy Observations Prior; Normal-Wishart Distribution (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 (search for similar items in EconPapers)
Pages: 12
Date: 2016-04
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