Econometric Theory

Table of Contents - 1994 - Volume 10, Issue 3-4  

Articles

Bayesian Encompassing Tests of a Unit Root Hypothesis

Jean-Pierre Florensa1, Sophie Larribeaua1 and Michel Moucharta2

a1 Université des Sciences Sociales de Toulouse

a2 Université Catholique de Louvain

Abstract

The object of this paper is to report, for a simple testing problem of a unit root hypothesis, some experience regarding the numerical problems involved by using a Bayesian encompassing test, i.e., a Bayesian procedure that treats the null and the alternative hypotheses as different models, the null one and the alternative one, that share a same sample space but with different parameter spaces. Numerical procedures and efficient simulations are discussed briefly, and the numerical results so obtained are used to evaluate the meaning of the prior specification and of the empirical evidence about a unit root inference.