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- Following Kim and Nelson (1998), we use ð›¾ð‘— ð‘š = 0 and ð´ð‘— ð‘š = 1 for j = 1...3, ð›¾4 ð‘š = 04ð‘¥1 and ð´4 ð‘š = ð¼ð‘‘4. Notation: ∆ð¶ð‘—,1..𑇠∗ ̃ is the (TxNj) vector of right-hand-side variables in the above equations. Posterior distributions: ð‘ ([(ð´ð‘— ð‘š ) −1 + (ðœŽð‘— ð‘š ) −2 ∆ð¶ð‘—,1..𑇠∗ ̃ ′∆ð¶ð‘—,1..𑇠∗ ̃ ] −1 [(ð´ð‘— ð‘š ) −1 ð›¾ð‘— ð‘š + (ðœŽð‘— ð‘š ) −2 ∆ð¶ð‘—,1..𑇠∗ ̃ ′∆ð‘¦ð‘—,1..𑇠∗ ̃ ] , [(ð´ð‘— ð‘š ) −1 + (ðœŽð‘— ð‘š ) −2 ∆ð¶ð‘—,1..𑇠∗ ̃ ′∆ð¶ð‘—,1..𑇠∗ ̃ ] −1 ) 42ï¼ Step 5a: Draw ððŸ ð’’ conditional on ð‘¢1,1..𑇠𑞠̃ and ðœŽ1 ð‘ž , based on the following equation: ð‘¢1,ð‘¡ ð‘ž = ðœ“11 ð‘ž ð‘¢1,ð‘¡âˆ’1 ð‘ž + ðœŽ1 𑞠∙ ðœ€1ð‘¡ ð‘ž Prior distribution: ðœ“1 ð‘ž ~ð‘ (ðœ“1 ð‘ž , ðµ1 ð‘ž
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