BVAR with exogenous variables

[sanjeev]

I am running a Bayesian VAR using mixed estimation with variables that are integrated of order 1 as endogenous variables and variables that are stationary as exogenous variables. One of the stationary exogenous variables is a dummy variable, while the other exogenous variables are relevant from a theoretical point of view. If I wish to estimate the Bayesian VAR for this model with normal Inverted wishart as the prior, does RATS allow me to do the same? ( I wish to keep the flat prior on the exogenous variables). Is it also possible to model the Hierarchical prior(Korobilis (2012)) Thanks in advance.

[TomDoan]

I am running a Bayesian VAR using mixed estimation with variables that are integrated of order 1 as endogenous variables and variables that are stationary as exogenous variables. One of the stationary exogenous variables is a dummy variable, while the other exogenous variables are relevant from a theoretical point of view. If I wish to estimate the Bayesian VAR for this model with normal Inverted wishart as the prior, does RATS allow me to do the same? ( I wish to keep the flat prior on the exogenous variables).

Yes. I'm not sure why you think there's an issue.

Is it also possible to model the Hierarchical prior(Korobilis (2012)) Thanks in advance.

Could you please provide a full reference?

[sanjeev]

When i tried to run the Gibbs VAR programme with these additional variables (exogenous) I get the following error message.

## MAT14. Non-invertible Matrix. Using Generalized Inverse for SYMMETRIC.
The Error Occurred At Location 63, Line 6 of loop/block
So I was wondering if the problem is with the data set or the programmes and that is why i sent the query. Your response has helped.

The reference for the Hierarchical prior is is Korobilis, D. (2012). “VAR Forecasting Using Bayesian Variable Selection,” Journal
of Applied Econometrics.

[TomDoan]

See https://estima.com/forum/viewtopic.php?f=7&t=1267

[sanjeev]

thanks a ton for the help.