Bayesian econometrics

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 (2004) An Introduction to Modern Bayesian Econometrics, Blackwell Publishing. ISBN 1405117206
• Gary Koop, Dale J. Poirier, Justin L. Tobias (2007) Bayesian Econometric Methods, Cambridge University Press. ISBN 0521855713
• Zellner, A. (1996) An Introduction to Bayesian Inference in Econometrics, Wiley. ISBN 0471169374 (reprint of 1971 edition)