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

46 Pages Posted: 29 Jan 2006

See all articles by Alessandro Rebucci

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Matteo Ciccarelli

European Central Bank (ECB)

Date Written: May 2003

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: Bayesian VAR, Gibbs sampling, Time-Varying Reaction Function, EMS

JEL Classification: C11, C15, C32, E58

Suggested Citation

Rebucci, Alessandro and Ciccarelli, Matteo, Bayesian Vars: A Survey of the Recent Literature with an Application to the European Monetary System (May 2003). IMF Working Paper No. 03/102, Available at SSRN: https://ssrn.com/abstract=879178

Alessandro Rebucci (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Matteo Ciccarelli

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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