Uniform Priors for Impulse Responses

There has been a call for caution regarding the standard procedure for Bayesian inference in set‐identified structural vector autoregressions on the grounds that the common practice of using a uniform prior over the set of orthogonal matrices induces a non‐uniform prior for individual impulse responses or other quantities of interest. This paper challenges this call by formally showing that when the focus is on joint inference, the uniform prior over the set of orthogonal matrices is not only sufficient but also necessary for inference based on a uniform joint prior distribution over the identified set for the vector of impulse responses. In addition, we show how to conduct inference based on a uniform joint prior distribution for the vector of impulse responses.

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Publication Details

Journal
Econometrica
Published
2025-01-01
DOI
https://doi.org/10.3982/ecta21101
Citations
8
Primary Topic
Probabilistic and Robust Engineering Design
Type
article
Field-Weighted Citation Impact
11.19
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article

Uniform Priors for Impulse Responses

Daniel F. Waggoner, Juan Francisco Rubio-Ramı́rez, Jonas E. Arias
8 citations
Econometrica
Probabilistic and Robust Engineering Design
11.19
article

Uniform Priors for Impulse Responses

Daniel F. Waggoner, Juan Francisco Rubio-Ramı́rez, Jonas E. Arias
article en
8 citations

Abstract

There has been a call for caution regarding the standard procedure for Bayesian inference in set‐identified structural vector autoregressions on the grounds that the common practice of using a uniform prior over the set of orthogonal matrices induces a non‐uniform prior for individual impulse responses or other quantities of interest. This paper challenges this call by formally showing that when the focus is on joint inference, the uniform prior over the set of orthogonal matrices is not only sufficient but also necessary for inference based on a uniform joint prior distribution over the identified set for the vector of impulse responses. In addition, we show how to conduct inference based on a uniform joint prior distribution for the vector of impulse responses.

EconometricaVol. 93(2)
Federal Reserve Bank of Atlanta (US), Emory University (US), Federal Reserve Bank of Philadelphia (US)
Openalex Percentile: Top 2%
Probabilistic and Robust Engineering Design
11.19
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