The Impact on Forecasts and Impulse Responses of Restricting Drift in a Vector Autoregression

John Landon-Lane ()

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) variables are made using Bayesian methods. In particular, the implications on the forecast and impulse response function distributions of directly estimating and restricting the drift parameters of variables in a VAR are studied. It is found that the forecast and impulse response distributions are sensitive to the prior distribution placed over the drift parameters.

Keywords: Forecasts; Impulse Response Function; Markov chain Monte Carlo; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C11 C13 C32 (search for similar items in EconPapers)
Date: 2001-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200114

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