Structural analysis of cointegrating VARS

Pesaran, M.H. and Smith, Ron P. (1998) Structural analysis of cointegrating VARS. Journal of Economic Surveys 12 (5), pp. 471-505. ISSN 1467-6419.

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Official URL: https://doi.org/10.1111/1467-6419.00065

Abstract

This survey uses a number of recent developments in the analysis of cointegrating Vector Autoregressions (VARs) to examine their links to the older structural modelling traditions using Autoregressive Distributed Lag (ARDL), and Simultaneous Equations Models (SEMs). In particular, it emphasizes the importance of using judgement and economic theory to supplement the statistical information. After a brief historical review it sets out the statistical framework, discusses the identification of impulse responses using the Generalized Impulse Response functions, reviews the analysis of cointegrating VARs and highlights the large number of choices applied workers have to make in determining a specification. In particular, it considers the problem of specification of intercepts and trends and the size of the VAR in more detail, and examines the advantages of the use of exogenous variables in cointegration analysis. The issues are illustrated with a small U.S. Macroeconomic model.

Metadata

Item Type:	Article
School:	Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User:	Sarah Hall
Date Deposited:	31 Aug 2020 17:08
Last Modified:	02 Aug 2023 18:03
URI:	https://eprints.bbk.ac.uk/id/eprint/40677

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