## Friday, April 27, 2012

### A Bayesian Consumption Function

What the title of this post is supposed to mean is: "Estimating a simple aggregate consumption function using Bayesian regression analysis".

In a recent post I mentioned my long-standing interest in Bayesian Econometrics. When I teach this material I usually include a simple application that involves estimating a consumption function using U.S. time-series data. I used to have this coded up for the SHAZAM package. EViews isn't appropriate as it doesn't include a numerical integration routine.

You could use BUGS, or some other package, but it's nice to see what is going on, step-by-step, when you're encountering this stuff for the first time.

The other day, I thought, "It's time to code this up in R". So, here we are!