Wednesday, November 19, 2014

The Rise of Bayesian Econometrics

A recent discussion paper by Basturk et al. (2014) provides us with (at least) two interesting pieces of material. First, they give a very nice overview of the origins of Bayesian inference in econometrics. This is a topic dear to my heart, given that my own Ph.D. dissertation was in Bayesian Econometrics; and I began that work in early 1973 - just two years after the appearance of Arnold Zellners' path-breaking book (Zellner, 1971).

Second, they provide an analysis of how the associated contributions have been clustered, in terms of the journals in which they have been published. The authors find, among other things, that: 
"Results indicate a cluster of journals with theoretical and applied papers, mainly consisting of Journal of Econometrics, Journal of Business and Economic Statistics, and Journal of Applied Econometrics which contains the large majority of high quality Bayesian econometrics papers."
A couple of the paper coming out of my dissertation certainly fitted into that group - Giles (1975) and Giles and Rayner (1979).

The authors round out their paper as follows:
"...with a list of subjects that are important challenges for twenty-first century Bayesian conometrics: Sampling methods suitable for use with big data and fast, parallelized and GPU, calculations, complex models which account for nonlinearities, analysis of implied model features such as risk and instability, incorporating model incompleteness, and a natural combination of economic modeling, forecasting and policy interventions."
So, there's lots more to be done!


References


Basturk, N., C. Cacmakli, S. P. Ceyhan, and H. K. van Dijk, 2014. On the rise of Bayesian econometrics after Cowles Foundation monographs 10 and 14. Tinbergen Institute Discussion Paper TI 2014-085/III.

Giles, D.E.A., 1975. Discriminating between autoregressive forms: A Monte Carlo comparison of Bayesian and ad hoc methods”, Journal of Econometrics, 3, 229-248.

Giles, D.E.A.and A.C. Rayner, 1979. The mean squared errors of the maximum likelihood and natural-conjugate Bayes regression estimators”, Journal of Econometrics, 11, 319-334.

Zellner, A., 1971. An Introduction to Bayesian Inference in Econometrics. Wiley, New York.

© 2014, David E. Giles

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