Koop, GaryLeon-Gonzalez, RobertoStrachan, Rodney2015-12-080304-4076http://hdl.handle.net/1885/34857There are both theoretical and empirical reasons for believing that the parameters of macroeconomic models may vary over time. However, work with time-varying parameter models has largely involved vector autoregressions (VARs), ignoring cointegration. This is despite the fact that cointegration plays an important role in informing macroeconomists on a range of issues. In this paper, we develop a new time varying parameter model which permits cointegration. We use a specification which allows for the cointegrating space to evolve over time in a manner comparable to the random walk variation used with TVPVARs. The properties of our approach are investigated before developing a method of posterior simulation. We use our methods in an empirical investigation involving the Fisher effect.Keywords: Bayesian; Error correction model; Markov chain Monte Carlo; Reduced rank regression; Time varying; Bayesian networks; Inference engines; Markov processes; Regression analysis; Economics Bayesian; Error correction model; Markov Chain Monte Carlo; Reduced rank regression; Time varying cointegration201110.1016/j.jeconom.2011.07.0072016-02-24