A, B, C’s, (and D’s) for understanding VARs

Jesus Fernandez-Villaverde (), Juan F Rubio-Ramirez () and Thomas Sargent ()

No 2005-09, Working Paper from Federal Reserve Bank of Atlanta

Abstract: The dynamics of a linear (or linearized) dynamic stochastic economic model can be expressed in terms of matrices (A, B, C, D) that define a state-space system. An associated state space system (A, K, C, S) determines a vector autoregression (VAR) for observables available to an econometrician. We review circumstances in which the impulse response of the VAR resembles the impulse response associated with the economic model. We give four examples that illustrate a simple condition for checking whether the mapping from VAR shocks to economic shocks is invertible. The condition applies when there are equal numbers of VAR and economic shocks.

New Economics Papers: this item is included in nep-bec and nep-ets
Date: 2005
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Related works:
Working Paper: A,B,C's (and D's)'s for Understanding VARS (2005)
Working Paper: A, B, C’s (And D’s) For Understanding VARS (2005)
Working Paper: A,B,C's (and D's)'s for Understanding VARS (2006)
Working Paper: A, B, C's (and D)'s for Understanding VARs (2005)
Journal Article: ABCs (and Ds) of Understanding VARs
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