- Identification issues in limited-information Bayesian analysis of structural macroeconomic models
- Number of pages
- Brown University
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
The likelihood of the parameters in structural macroeconomic models typically has non-identification regions over which it is constant. When sufficiently diffuse priors are used, the posterior piles up in such non-identification regions. Use of informative priors can lead to the opposite so both can generate spurious inference. We propose priors/posteriors on the structural parameters that are
implied by priors/posteriors on the parameters of an embedding reduced-form model. An example of such a prior is the Jeffreys prior. We use it to conduct Bayesian limited-information inference on the new Keynesian Phillips curve with a VAR reduced form for US data.
- May 21, 2013
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