Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86736
Authors: 
Strachan, Rodney W.
van Dijk, Herman K.
Year of Publication: 
2008
Series/Report no.: 
Tinbergen Institute Discussion Paper 08-096/4
Abstract: 
A Bayesian model averaging procedure is presented that makes use of a finite mixture of many model structures within the class of vector autoregressive (VAR) processes. It is applied to two empirical issues. First, stability of the Great Ratios in U.S. macro-economic time series is investigated, together with the effect of permanent shocks on business cycles. Second, the linear VAR model is extended to include a smooth transition function in a (monetary) equation and stochastic volatility in the disturbances. The risk of a liquidity trap in the U.S.A. and Japan is evaluated. Although this risk found to be reasonably high, we find only mild evidence that the monetary policy transmission mechanism is different and that central banks consider the expected cost of a liquidity trap in policy setting. Posterior probabilities of different models are evaluated using Markov chain Monte Carlo techniques.
Subjects: 
Posterior probability
Grassman manifold
Orthogonal group
Cointegration
Model averaging
Stochastic trend
Impulse response
Vector autoregressive model
Great Ratios
Liquidity trap
JEL: 
C11
C32
C52
Document Type: 
Working Paper

Files in This Item:
File
Size
505.49 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.