Bayesian Analysis of Recursive SVAR Models with Overidentifying Restrictions
21 Pages Posted: 22 Nov 2012
Date Written: November 15, 2012
The paper provides a novel Bayesian methodological framework to estimate structural VAR (SVAR) models with recursive identification schemes that allows for the inclusion of over-identifying restrictions. The proposed framework enables the researcher to elicit the prior on the non-zero contemporaneous relations between economic variables and to derive an analytical expression for the posterior distribution and marginal data density. We illustrate our methodological framework by estimating a backward looking New-Keynesian model taking into account prior beliefs about the contemporaneous coefficients in the Phillips curve and Taylor rule.
Keywords: structural VAR, Bayesian inference, overidentifying restrictions
JEL Classification: C11, C32, E47
Suggested Citation: Suggested Citation