Interpretation and Identification of VAR Models

Klaus Neusser ()

Chapter 15 in Time Series Econometrics, 2016, pp 255-294 from Springer

Abstract: Abstract Although the estimation of VAR models poses no difficulties as outlined in the previous chapter, the individual coefficients are almost impossible to interpret. On the one hand, there are usually many coefficients, a VAR(4) model with three variables, for example, already has twelve coefficients per equation and thus 36 coefficients in total to interpret; on the other hand, there is in general no unambiguous relation of the VAR coefficients to the coefficients of a particular model. The last problem is known as the identification problem. To overcome this identification problem, many techniques have been developed which should allow to give the estimated VAR model an explicit economic interpretation.

Keywords: Money Supply; Impulse Response Function; Demand Shock; Structural Shock; Forecast Horizon (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-319-32862-1_15

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DOI: 10.1007/978-3-319-32862-1_15

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