Time varying VARs with inequality restrictions

B-Tier
Journal: Journal of Economic Dynamics and Control
Year: 2011
Volume: 35
Issue: 7
Pages: 1126-1138

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

In many applications involving time-varying parameter VARs, it is desirable to restrict the VAR coefficients at each point in time to be non-explosive. This is an example of a problem where inequality restrictions are imposed on states in a state space model. In this paper, we describe how existing MCMC algorithms for imposing such inequality restrictions can work poorly (or not at all) and suggest alternative algorithms which exhibit better performance. Furthermore, we show that previous algorithms involve an approximation relating to a key prior integrating constant. Our algorithms are exact, not involving this approximation. In an application involving a commonly used U.S. data set, we present evidence that the algorithms proposed in this paper work well.

Technical Details

RePEc Handle
repec:eee:dyncon:v:35:y:2011:i:7:p:1126-1138
Journal Field
Macro
Author Count
2
Added to Database
2026-01-25