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Bayesian Model Selection in the Analysis of Cointegration

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  • Justyna Wróblewska

    (Cracow University of Economics)

Abstract

In this paper we present the Bayesian model selection procedure within the class of cointegrated processes. In order to make inference about the cointegration space we use the class of Matrix Angular Central Gaussian distributions. To carry out posterior simulations we use an alorithm based on the collapsed Gibbs sampler. The presented methods are applied to the analysis of the price - wage mechanism in the Polish economy.

Suggested Citation

  • Justyna Wróblewska, 2009. "Bayesian Model Selection in the Analysis of Cointegration," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 1(1), pages 57-69, March.
    • Handle: RePEc:psc:journl:v:1:y:2009:i:1:p:57-69
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    References listed on IDEAS

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    1. Gary Koop & Simon M. Potter & Rodney W. Strachan, 2008. "Re-Examining the Consumption-Wealth Relationship: The Role of Model Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 341-367, March.
    2. Rodney Strachan & Herman K. van Dijk, "undated". "Bayesian Model Averaging in Vector Autoregressive Processes with an Investigation of Stability of the US Great Ratios and Risk of a Liquidity Trap in the USA, UK and Japan," MRG Discussion Paper Series 1407, School of Economics, University of Queensland, Australia.
    3. Urbain, Jean-Pierre, 1992. "On Weak Exogeneity in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(2), pages 187-207, May.
    4. Chikuse, Yasuko, 1990. "The matrix angular central Gaussian distribution," Journal of Multivariate Analysis, Elsevier, vol. 33(2), pages 265-274, May.
    5. Welfe, Aleksander & Majsterek, Michal, 2002. "Wage and Price Inflation in Poland in the Period of Transition: The Cointegration Analysis," Economic Change and Restructuring, Springer, vol. 35(3), pages 205-219.
    6. Rodney W. Strachan, 2007. "Bayesian Inference in Cointegrated I (2) Systems: A Generalization of the Triangular Model," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 439-468.
    7. Strachan, Rodney W. & Inder, Brett, 2004. "Bayesian analysis of the error correction model," Journal of Econometrics, Elsevier, vol. 123(2), pages 307-325, December.
    8. Anindya Banerjee & Lynne Cockerell & Bill Russell, 2001. "An I(2) analysis of inflation and the markup," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 221-240.
    9. Osiewalski, Jacek & Welfe, Aleksander, 1998. "The price-wage mechanism: An endogenous switching model," European Economic Review, Elsevier, vol. 42(2), pages 365-374, February.
    10. Hans Christian Kongsted, 2003. "An I(2) cointegration analysis of small-country import price determination," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 53-71, June.
    11. Gary Koop & Roberto León-González & Rodney W. Strachan, 2010. "Efficient Posterior Simulation for Cointegrated Models with Priors on the Cointegration Space," Econometric Reviews, Taylor & Francis Journals, vol. 29(2), pages 224-242, April.
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    Cited by:

    1. Jacek Osiewalski & Justyna Wróblewska & Kamil Makieła, 2020. "Bayesian comparison of production function-based and time-series GDP models," Empirical Economics, Springer, vol. 58(3), pages 1355-1380, March.

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    More about this item

    Keywords

    cointegration; Bayesian analysis; Grassmann manifold; Stiefel manifold; posterior probability;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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