Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153126 
Authors: 
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper No. 692
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
The paper considers a Bayesian approach to the cointegrated VAR model with a uniform prior on the cointegration space. Building on earlier work by Villani (2005b), where the posterior probability of the cointegration rank can be calculated conditional on the lag order, the current paper also makes it possible to compute the joint posterior probability of these two parameters as well as the marginal posterior probabilities under the assumption of a known upper bound for the lag order. When the marginal likelihood identity is used for calculating these probabilities, a point estimator of the cointegration space and the weights is required. Analytical expressions are therefore derived of the mode of the joint posterior of these parameter matrices. The procedure is applied to a money demand system for the euro area and the results are compared to those obtained from a maximum likelihood analysis.
Subjects: 
Bayesian inference
cointegration
lag order
Money demand
vector autoregression
JEL: 
C11
C15
C32
E41
Document Type: 
Working Paper

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