Extensions to -var- and -svar- estimation

Michael Steven Hanson and Yingzhe Zhao
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Yingzhe Zhao: Wesleyan University

North American Stata Users' Group Meetings 2007 from Stata Users Group

Abstract: We develop packages to support computation of historical decompositions in (S)VAR models in Stata, and to extend the estimation of impulse response functions. Specifically, we compute cumulative structural impulse responses, which are useful for SVAR models that rely on long-run restrictions. While such models typically are estimated in differences, the responses of the levels of the endogenous variables to the identified structural innovations (that is, the cumulative structural impulse responses) are most often of theoretical interest. We also allow an option to relax the default assumption of symmetry when computing bootstrapped error bands for the impulse response functions. Additionally, we develop a package to compute the historical decompositions of the variables in a SVAR, as a function of the estimated structural shocks. Used in conjunction with the previous package, one can compute historical decompositions for the levels of variables from a long-run SVAR model estimated in first differences. An application to the determination of the equilibrium Chinese real exchange rate will be shown.

Date: Written 2007-08-15

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http://repec.org/nasug2007/hanson_nasug07.pdf presentation slides (application/pdf)

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