BVAR (litterman) Specifying different priors to different variables

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BVAR (litterman) Specifying different priors to different variables

Postby hlin » Fri Sep 16, 2016 11:33 am

Dear all,
I am running a simple 3 variable VAR (gdp, interest rate, and inflation). How do I specify different mu1, l1, l2 for different variables under litterman prior? If three variables all share the same priors then the code would be:
var mod.bvar(prior=lit, mu1=1, l1=0.20, l2=0.99) 1 2 GDP INTEREST INFLATION

But how should I modify if I would assign mu1=0 for GDP and mu1=1 for inflation, for example?

Thank you

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Re: BVAR (litterman) Specifying different priors to different variables

Postby EViews Gareth » Fri Sep 16, 2016 12:07 pm

You cannot.
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BVAR estimation

Postby adrangi » Tue Sep 05, 2017 8:36 pm

Hi. I have four variables and about 550 monthly observations. All variables are nonstationary. Sims recommends running BVAR if variables are nonstationary, so I tried. I got the error message "singular matrix" so I assume some determinants disappeared and I got no estimates or IRFs. I used the BVAR add-in. Any suggestions. Thanks. BA

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