Asymmetric Conjugate Priors for Large Bayesian VARs

11/13/2021
by   Joshua C. C. Chan, et al.
0

Large Bayesian VARs are now widely used in empirical macroeconomics. One popular shrinkage prior in this setting is the natural conjugate prior as it facilitates posterior simulation and leads to a range of useful analytical results. This is, however, at the expense of modeling flexibility, as it rules out cross-variable shrinkage – i.e., shrinking coefficients on lags of other variables more aggressively than those on own lags. We develop a prior that has the best of both worlds: it can accommodate cross-variable shrinkage, while maintaining many useful analytical results, such as a closed-form expression of the marginal likelihood. This new prior also leads to fast posterior simulation – for a BVAR with 100 variables and 4 lags, obtaining 10,000 posterior draws takes less than half a minute on a standard desktop. We demonstrate the usefulness of the new prior via a structural analysis using a 15-variable VAR with sign restrictions to identify 5 structural shocks.

READ FULL TEXT

page 1

page 2

page 3

page 4

research
08/10/2022

Locally Adaptive Bayesian Isotonic Regression using Half Shrinkage Priors

Isotonic regression or monotone function estimation is a problem of esti...
research
04/25/2019

Bayesian Variable Selection for Multi-Outcome Models Through Shared Shrinkage

Variable selection over a potentially large set of covariates in a linea...
research
03/16/2022

Sparse Bayesian Inference on Positive-valued Data using Global-local Shrinkage Priors

In various applications, we deal with high-dimensional positive-valued d...
research
07/02/2019

On Global-local Shrinkage Priors for Count Data

Global-local shrinkage prior has been recognized as useful class of prio...
research
12/27/2018

Bayesian Fusion Estimation via t-Shrinkage

Shrinkage prior has gained great successes in many data analysis, howeve...
research
06/14/2022

A new algorithm for structural restrictions in Bayesian vector autoregressions

A comprehensive methodology for inference in vector autoregressions (VAR...
research
12/09/2019

Semiparametric Regression for Dual Population Mortality

Parameter shrinkage applied optimally can always reduce error and projec...

Please sign up or login with your details

Forgot password? Click here to reset