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A Bayesian Vector Autoregressive Model with Informative Steady-state Priors for the Australian Economy
Division of Monetary Affairs, Board of Governors of the Federal Reserve System.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2008 (English)In: The Economic Record, ISSN 0013-0249, E-ISSN 1475-4932, Vol. 84, no 267, 449-465 p.Article in journal (Refereed) Published
Abstract [en]

This article applies a Bayesian vector autoregressive model with informative steady-state priors to a parsimonious model of the Australian economy. The model captures economic linkages among key Australian and US variables and is estimated on quarterly data from 1985 to 2006. An out-of-sample forecast exercise shows that the model with informative steady-state priors generally outperforms a traditional Bayesian vector autoregressive model as well as naïve forecasts. The model can also be used to generate density forecasts and analyse alternative scenarios, which we illustrate with the effect on the Australian economy of a substantial real depreciation of the US dollar.

Place, publisher, year, edition, pages
2008. Vol. 84, no 267, 449-465 p.
Keyword [en]
C32, E37
National Category
Research subject
URN: urn:nbn:se:uu:diva-108510DOI: 10.1111/j.1475-4932.2008.00510.xISI: 000261396200004OAI: oai:DiVA.org:uu-108510DiVA: diva2:236084
Available from: 2009-09-21 Created: 2009-09-21 Last updated: 2011-01-04Bibliographically approved

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