Research seminar by Marek Jarocinski (ECB): “Autoregressions and Priors about Initial Growth Rates”
Thursday, April 16 ICEF held Research seminar.
Presenter: Marek Jarocinski (ECB)
Topic: “Autoregressions and Priors about Initial Growth Rates” (pdf)
Abstract: We discuss estimation of autoregressive models with a prior about initial growth rates of the modeled series. This prior allows to specify prior beliefs about the behavior of time series in a natural way and it serves to replace arbitrary assumptions on initial conditions. To implement this prior we develop a technique for translating priors about observables into priors about coefficients. The posterior mean is attractive even from the frequentist point of view: it is often less biased than the OLS estimate and has better frequentist risk than bias corrected estimates. We apply our prior to a macroeconomic Vector Autoregression for the United States and find that it makes a big difference for the estimated persistence of output responses to monetary policy shocks.
Venue: Pokrovsky bulvar, 11; Zh-822