Bayesian Inference in Dynamic Disequilibrium Models: An Application to the Polish Credit Market

CORE Discussion Paper No. 2006/50

24 Pages Posted: 22 Aug 2006

See all articles by Luc Bauwens

Luc Bauwens

Université catholique de Louvain

Michel Lubrano

Ecole des Hautes Etudes en Sciences Sociales (EHESS)

Date Written: May 2006

Abstract

We review Bayesian inference for dynamic latent variable models using the data augmentation principle. We detail the difficulties of simulating dynamic latent variables in a Gibbs sampler. We propose an alternative specification of the dynamic disequilibrium model which leads to a simple simulation procedure and renders Bayesian inference fully operational. Identification issues are discussed. We conduct a specification search using the posterior deviance criterion of Spiegelhalter, Best, Carlin, and van der Linde (2002) for a disequilibrium model of the Polish credit market.

Keywords: Latent variables, disequilibrium models, Bayesian inference, Gibbs sampler, credit rationing

JEL Classification: C11, C32, C34, E51

Suggested Citation

Bauwens, Luc and Lubrano, Michel, Bayesian Inference in Dynamic Disequilibrium Models: An Application to the Polish Credit Market (May 2006). CORE Discussion Paper No. 2006/50, Available at SSRN: https://ssrn.com/abstract=925677 or http://dx.doi.org/10.2139/ssrn.925677

Luc Bauwens (Contact Author)

Université catholique de Louvain ( email )

CORE
34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
32 10 474321 (Phone)
32 10 474301 (Fax)

Michel Lubrano

Ecole des Hautes Etudes en Sciences Sociales (EHESS) ( email )

Greqam, Vieille Charité
2 rue de la Charité
13002 Marseille
France

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