Bayesian methods are increasingly becoming attractive to researchers in many
fields. Econometrics, however, is a field in which Bayesian methods have had
relatively less influence. A key reason for this absence is the lack of a suitable
advanced undergraduate or graduate level textbook. Existing Bayesian books are
either out-dated, and hence do not cover the computational advances that have
revolutionized the field of Bayesian econometrics since the late 1980s, or do not
provide the broad coverage necessary for the student interested in empirical work
applying Bayesian methods. For instance, Arnold Zellner’s seminal Bayesian
econometrics book (Zellner, 1971) was published in 1971. Dale Poirier’s influential
book (Poirier, 1995) focuses on the methodology and statistical theory
underlying Bayesian and frequentist methods, but does not discuss models used
by applied economists beyond regression. Other important Bayesian books, such
as Bauwens, Lubrano and Richard (1999), deal only with particular areas of
econometrics (e.g. time series models). In writing this book, my aim has been
to fill the gap in the existing set of Bayesian textbooks, and create a Bayesian
counterpart to the many popular non-Bayesian econometric textbooks now available
(e.g. Greene, 1995). That is, my aim has been to write a book that covers a
wide range of models and prepares the student to undertake applied work using
Bayesian methods.
This book is intended to be accessible to students with no prior training in
econometrics, and only a single course in mathematics (e.g. basic calculus). Students
will find a previous undergraduate course in probability and statistics useful;
however Appendix B offers a brief introduction to these topics for those without
the prerequisite background. Throughout the book, I have tried to keep the level
of mathematical sophistication reasonably low. In contrast to other Bayesian and
comparable frequentist textbooks, I have included more computer-related material.
Modern Bayesian econometrics relies heavily on the computer, and developing
some basic programming skills is essential for the applied Bayesian. The
required level of computer programming skills is not that high, but I expect that
this aspect of Bayesian econometrics might be most unfamiliar to the student
brought up in the world of spreadsheets and click-and-press computer packages.
Accordingly, in addition to discussing computation in detail in the book itself, the
website associated with the book contains MATLAB programs for performing
Bayesian analysis in a wide variety of models. In general, the focus of the book
is on application rather than theory. Hence, I expect that the applied economist
interested in using Bayesian methods will find it more useful than the theoretical
econometrician.
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