A Gibbs Sampling Approach to Cointegration

This paper reviews the application of Gibbs sampling to a cointegrated VAR system. Aggregate imports and import prices for Belgium are modelled using two cointegrating relations. Gibbs sampling techniques are used to estimate from a Bayesian perspective the cointegrating relations and their weights in the VAR system. Extensive use of spectral analysis is made to get insight into convergence issues. CORE, Universit e catholique de Louvain. Support of the European Commission Human Capital and Mobility Program through the network \Econometric inference using simulation methods" is gratefully acknowledged. While remaining responsible for any error, the authors wish to thank Herman van Dijk for useful remarks and suggestions.