TESTING FOR COINTEGRATION RANK USING BAYES FACTORS

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.

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Year of publication:	2002
Authors:	Sugita, Katsuhiro
Institutions:	Department of Economics, University of Warwick
Subject:	Cointegration \| MCMC \| Bayes factor

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Series:	The Warwick Economics Research Paper Series (TWERPS).
Type of publication:	Book / Working Paper
Language:	English
Notes:	17 pages
Classification:	C11 - Bayesian Analysis ; C12 - Hypothesis Testing ; C32 - Time-Series Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005747098