ABCs (and Ds) of Understanding VARs

Jesus Fernandez-Villaverde, Juan F Rubio-Ramirez, Thomas Sargent and Mark Watson

American Economic Review, 2007, vol. 97, issue 3, 1021-1026

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 for a vector of observables. An associated state space system (A,ˆB,C,ˆD) determines a vector autoregression for those same observables. We present a simple condition for checking when these two state space systems match up and when they do not when there are equal numbers of economic and VAR shocks. We illustrate our condition with a permanent income example. (JEL C32, E32)

Date: 2007
Note: DOI: 10.1257/aer.97.3.1021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (314)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.3.1021 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: A,B,C's (and D's)'s for Understanding VARS (2006)
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 for Understanding VARs (2005)
Working Paper: A, B, C’s (And D’s) For Understanding VARS (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:97:y:2007:i:3:p:1021-1026

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().