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Working Paper
Uniform Priors for Impulse Responses
There has been a call for caution when using the conventional method for Bayesian inference in set-identified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for key objects of interest. This paper challenges this call. Although the prior distributions of individual impulse responses induced by the conventional method may be nonuniform, they typically do not drive the posteriors if one does not condition on the reduced-form parameters. Importantly, when the focus is on joint inference, the uniform prior over the ...
Working Paper
Priors and the Slope of the Phillips Curve
The slope of the Phillips curve in New Keynesian models is difficult to estimate using aggregate data. We show that in a Bayesian estimation, the priors placed on the parameters governing nominal rigidities significantly influence posterior estimates and thus inferences about the importance of nominal rigidities. Conversely, we show that priors play a negligible role in a New Keynesian model estimated using state-level data. An estimation with state-level data exploits a relatively large panel dataset and removes the influence of endogenous monetary policy.