Bayesian treatment of the independent student-t linear model


  • J. Geweke

    1. Department of Economics, University of Minnesota, 1035 Management and Economics Building, 271 South 19th Street, Minneapolis, Minnesota 55455, USA
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This article takes up methods for Bayesian inference in a linear model in which the disturbances are independent and have identical Student-t distributions. It exploits the equivalence of the Student-t distribution and an appropriate scale mixture of normals, and uses a Gibbs sampler to perform the computations. The new method is applied to some well-known macroeconomic time series. It is found that posterior odds ratios favour the independent Student-t linear model over the normal linear model, and that the posterior odds ratio in favour of difference stationarity over trend stationarity is often substantially less in the favoured Student-t models.