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Bayesian econometrics

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Bayesian econometrics is a branch of econometrics which applies Bayesian principles to economic modelling.

The Bayesian principle is based on Bayes Theorem which states that the probability of B conditional on A is the ratio of joint probability of A and B divided by probability of B. Bayesian econometricians assume that coefficients in the model have prior distributions.

This approach was first propagated by Arnold Zellner.

References

  • Tony Lancaster, "An Introduction to Modern Bayesian Econometrics", Blackwell Publishing, 2004, ISBN 1405117206
  • Gary Koop, Dale J. Poirier, Justin L. Tobias, "Bayesian Econometric Methods", Cambridge University Press, 2007, ISBN 0521855713
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