I’m a basic user, I ran 2 DSGE models A and B, "Log marginal data densities"of A is H0= 184.14, H1= 168.18,B is Ho = 184.3, H1 = 166.09. As i know,model comparison is based on posterior odds ratio. But, i don’t know how to calculate prior odds ratio and posterior odds ratio? Can you show me the way to calculate and compare? Is the model have higher posterior odds ratio better ?Is The posterior probabilities evaluated by posterior odds ratio ?
Thanks a lot.
Consult the textbook “Bayesian Econometric Methods” by Gary Koop. It covers this issue in much detail at a moderate level of formality.
Dear jpfeifer ,
Thanks for your reply.