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|Title:||Bayesian Inference in Cointegrated I (2) Systems: a Generalisation of the Triangular Model|
|Authors:||Strachan, Rodney W.|
|Publisher:||Dept. of Economics, University of Leicester|
|Abstract:||This paper generalises the cointegrating model of Phillips (1991) to allow for I (0) , I (1) and I (2) processes. The model has a simple form that permits a wider range of I (2) processes than are usually considered, including a more flexible form of polynomial cointegration. Further, the specification relaxes restrictions identified by Phillips (1991) on the I (1) and I (2) cointegrating vectors and restrictions on how the stochastic trends enter the system. To date there has been little work on Bayesian I (2) analysis and so this paper attempts to address this gap in the literature. A method of Bayesian inference in potentially I (2) processes is presented with application to Australian money demand using a Jeffreys prior and a shrinkage prior.|
|Series/Report no.:||Discussion Papers in Economics|
|Appears in Collections:||Reports, Dept. of Economics|
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