Overview
Mattias Villani is an economist at Sveriges Riksbank (Research Division, Stockholm) and Stockholm University (Department of Statistics), known for Bayesian VAR methodology with a focus on prior elicitation, forecasting, and cointegration. His work introduced the steady state VAR reparametrization, which fills a gap in existing Bayesian VAR priors by enabling informative beliefs about the unconditional mean of the process.
Key Contributions / Features
- Villani (2008) — "Steady State Priors for Vector Autoregressions" (Journal of Applied Econometrics): introduced the mean-adjusted (steady state) VAR; three-block Gibbs sampler with closed-form full conditionals; steady state VECM; extended Waggoner-Zha (2003b) structural VAR sampler to non-zero prior means via the absolute normal distribution.
- Villani (2005a) — "Bayesian Reference Analysis of Cointegration" (Econometric Theory 21): Bayesian analysis of cointegrated VARs with reference priors.
- Villani and Warne (2003) — ECB Working Paper No. 296: Bayesian cointegrated structural VAR for small open economy monetary policy analysis.
- Villani (2005) — "Inference in Vector Autoregressive Models with an Informative Prior on the Steady State" (Riksbank WP 181): earlier working-paper version of the steady-state prior; the Gibbs sampler from this paper is the posterior engine used in Adolfson et al. (2005).
- Adolfson et al. (2005): Co-authored the full central bank application; 7-variable BVAR for Sweden with a 2% inflation steady-state prior; evaluated against Riksbank official forecasts and a 15-variable open-economy DSGE. See Forecast Combination and Historical Decomposition.
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