Stochastic search variable selection in vector error correction models with an application to a model of the UK macroeconomy
Version of Record online: 28 MAR 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 28, Issue 1, pages 62–81, January/February 2013
How to Cite
Jochmann, M., Koop, G., Leon-Gonzalez, R. and Strachan, R. W. (2013), Stochastic search variable selection in vector error correction models with an application to a model of the UK macroeconomy. J. Appl. Econ., 28: 62–81. doi: 10.1002/jae.1238
- Issue online: 21 JAN 2013
- Version of Record online: 28 MAR 2011
- Leverhulme Trust. Grant Number: F/00 273/J
This paper develops methods for stochastic search variable selection (currently popular with regression and vector autoregressive models) for vector error correction models where there are many possible restrictions on the cointegration space. We show how this allows the researcher to begin with a single unrestricted model and either do model selection or model averaging in an automatic and computationally efficient manner. We apply our methods to a large UK macroeconomic model. Copyright © 2011 John Wiley & Sons, Ltd.