Trends and Breaking Points of the Bayesian Econometric Literature
The authors recall the basic differences of view between classical and Bayesian analysis and note that the dispute among statisticians has not been exactly reflected in econometrics. Starting with a ‘falt prior’that is already contestable, Bayesian econometricians were happy to reproduce the results of their colleagues. This is now less the case and Bauwens and Lubrano suggest that Bayesian methods are more effective at detecting unit roots and avoiding spurious acceptance of integration of series.
In another area, that of computation, the authors suggest that there is more complementarity between classical and Bayesian econometrics and that the sort of tools used such as Gibbs sampling may be of general value. They conclude by suggesting that Bayesian methods will more than hold their own in cases where samples are small and extra information is necessary as is often the case.
Keywords: Bayesian econometrics, classical econometrics, Gibbs sampling, prior and posterior distributions, unit roots
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