This workbook is based upon the content of the RATS e-course on Bayesian Econometrics, offered in spring 2009. It covers most of the most important methods now used in Bayesian analysis in econometrics, including Gibbs sampling, Metropolis-Hastings and importance sampling. The applications are to a broad range of topics, include time series, cross-section and panel data. It assumes that the user is comfortable with such basic instructions as COMPUTE, DISPLAY, GRAPH, SCATTER and LINREG, and can use simple programming techniques such as DO loops. In each chapter, there is a Tips and Tricks section which covers in greater detail any functions or instructions that might be unfamiliar.
The presentation is based largely on Gary Koop’s Bayesian Econometrics (Koop (2003)). We’ve added to that in several areas, with a chapter on vector autoregressions, and examples from the literature for panel, cross-sectional data and state-space models. In most cases, we’ve included much of the statistical derivations from the book, presented in a way to highlight the calculations as they are done with RATS, so even those without the book can benefit.