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Bayesian Encompassing Tests of a Unit Root Hypothesis

Published online by Cambridge University Press:  11 February 2009

Jean-Pierre Florens ,
Sophie Larribeau  and
Michel Mouchart
Jean-Pierre Florens
Affiliation:
Université des Sciences Sociales de Toulouse
Sophie Larribeau
Affiliation:
Université des Sciences Sociales de Toulouse
Michel Mouchart
Affiliation:
Université Catholique de Louvain
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Abstract

The object of this paper is to report, for a simple testing problem of a unit root hypothesis, some experience regarding the numerical problems involved by using a Bayesian encompassing test, i.e., a Bayesian procedure that treats the null and the alternative hypotheses as different models, the null one and the alternative one, that share a same sample space but with different parameter spaces. Numerical procedures and efficient simulations are discussed briefly, and the numerical results so obtained are used to evaluate the meaning of the prior specification and of the empirical evidence about a unit root inference.

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Type
Articles
Information
Econometric Theory , Volume 10 , Issue 3-4 , August 1994 , pp. 747 - 763
Copyright
Copyright © Cambridge University Press 1994

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