Fitting a Distribution to Survey Data for the Half-Life of Deviations from PPP

Mark Fisher

Working Paper 2015-15
December 2015

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This note presents a nonparametric Bayesian approach to fitting a distribution to the survey data provided in Kilian and Zha (2002) regarding the prior for the half-life of deviations from purchasing power parity (PPP). A point mass at infinity is included. The unknown density is represented as an average of shape-restricted Bernstein polynomials, each of which has been skewed according to a preliminary parametric fit. A sparsity prior is adopted for regularization.

JEL classification: C11, C14, F31

Key words: nonparametric Bayesian estimation, Bernstein polynomials, simplex regression, importance sampling, PPP half-life deviations

The author thanks Tao Zha for bringing the paper to his attention. The views expressed here are the author's and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.
Please address questions regarding content to Mark Fisher, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8757,
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