Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5096424 | Journal of Econometrics | 2011 | 11 Pages |
Abstract
There are both theoretical and empirical reasons for believing that the parameters of macroeconomic models may vary over time. However, work with time-varying parameter models has largely involved vector autoregressions (VARs), ignoring cointegration. This is despite the fact that cointegration plays an important role in informing macroeconomists on a range of issues. In this paper, we develop a new time varying parameter model which permits cointegration. We use a specification which allows for the cointegrating space to evolve over time in a manner comparable to the random walk variation used with TVP-VARs. The properties of our approach are investigated before developing a method of posterior simulation. We use our methods in an empirical investigation involving the Fisher effect.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Gary Koop, Roberto Leon-Gonzalez, Rodney W. Strachan,