Bayesian Estimator of Vector-Autoregressive Model Under the Entropy Loss

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Bayesian Estimator of Vector-Autoregressive Model Under the Entropy Loss

Please use this identifier to cite or link to this item: http://hdl.handle.net/10355/2726

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Title: Bayesian Estimator of Vector-Autoregressive Model Under the Entropy Loss
Author: Ni, Shawn, 1962-; Dongchu, Sun
Keywords: VAR variables
Date: 2002
Publisher: Department of Economics
Citation: Department of Economics, 2002
Series/Report no.: Working papers (Department of Economics);WP 02-12
Abstract: The present study makes two contributions to the Bayesian Vector-Autoregression (VAR) literature. The first contribution is derivation of the Bayesian VAR estimator under the intrinsic entropy loss. The Bayesian estimator, which is distinctly different from the posterior mean, involves the frequentist expectation of a function of VAR variables. We find that the condition that allows for a closed-form expression of the frequentist expectation is violated even when the VAR is stationary, making it difficult to compute the Bayesian estimates via standard Markov Chain Monte Carlo (MCMC) procedures. The second contribution of the paper concerns MCMC simulation of the Bayesian estimator without using the closed-form expression of the frequentist expectation. A novelty of our MCMC algorithms is that they jointly simulate the posteriors of frequentist moments of VAR variables as well as the posteriors of VAR parameters. Numerical simulations show that the algorithms are surprisingly efficient.
URI: http://hdl.handle.net/10355/2726

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  • Economics publications (MU) [120]
    The items in this collection are the scholarly output of the faculty, staff, and students of the Department of Economics.

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