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Detecting time variation in the price puzzle: a less informative prior choice for time varying parameter VAR models

Tijdschriftbijdrage - Tijdschriftartikel

© 2017 Walter de Gruyter GmbH, Berlin/Boston 2017. This paper compares Bayesian estimators with different prior choices for the time variation of the coefficients of Time Varying Parameter Vector Autoregression models using Monte Carlo simulations. Since the commonly used prior choice only allows for a tiny amount of time variation, less informative priors are proposed. Additional empirical evidence on the time varying response of inflation to an interest rate shock is provided for USA. While a 'price puzzle' is detected for the period 1972-1979, the estimated response of inflation to an interest rate shock is negative for most other time periods.
Tijdschrift: Studies in Nonlinear Dynamics and Econometrics
ISSN: 1081-1826
Issue: 4
Volume: 21
Jaar van publicatie:2017
BOF-publication weight:0.1
CSS-citation score:1
Authors from:Higher Education