Testing for cointegration rank using Bayes factors
Sugita, Katsuhiro (2002) Testing for cointegration rank using Bayes factors. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.654).
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This paper proposes Bayesian methods for estimating the cointegration rank using Bayes factors. We consider natural conjugate priors for computing Bayes factors. First, we estimate the cointegrating vectors for each possible rank. Then, we compute the Bayes factors for each rank against 0 rank. Monte Carlo simulations show that using Bayes factor with conjugate priors produces fairly good results. We apply the method to demand for money in the US.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Cointegration, Econometrics, Bayesian statistical decision theory, Monte Carlo method|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||July 2002|
|Number of Pages:||17|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
 Bauwens, L., and Giot, P. 1998, A Gibbs Sampling Approach to Cointegration, Computational Statistics, 13, 339-368.
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