U.S.- Austria Cooperative Research on Asymptotic Bayesian Analysis and Order Selection

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This award supports Professor Peter Phillips of the Cowles Foundation for Research in Economics, Yale University, to collaborate with Professor Werner Ploberger of the Institute of Econometrics and Operations Research of the Technical University of Vienna in Austria. They plan to work jointly on several lines of research in econometrics. First, they will carry out asymptotic analysis of Bayesian methods for possibly non-stationary time series. Also, they will develop generalized Bayes model selection criteria with specific reference to problems of order selection in parametric methods. In addition, they intend to write computer software to implement the methods they develop and to apply them to macroeconomic data sets for the USA, Austria, and several other countries. Scientific interest in Bayesian methods has grown sharply over recent years and has affected many different fields of statistics and econometrics. Many econometricians find the Bayesian approach particularly well-suited to problems of time series analysis and inference in econometrics, two areas being explored in the collaboration of Drs. Phillips and Ploberger. Some of their research will contribute to improved modelling of economic time series. The other project they are engaged has an important application in the development of hypothesis tests under data-based model selection principles. Some hypotheses of considerable interest in economics, like that of the presence of an autoregressive unit root, remain invariant across different models. These investigators plan to exploit this invariance so that their "Bayes model" criteria can be used to select a system to conduct an explicit test of the unit root hypothesis.