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Vector Autoregressive Processes

Gebhard Kirchgässner, Juergen Wolters and Uwe Hassler

Chapter 4 in Introduction to Modern Time Series Analysis, 2013, pp 127-154 from Springer

Abstract: Abstract The previous chapter presented a statistical approach to analyse the relations between time series: starting with univariate models, we asked for relations that might exist between two time series. Subsequently, the approach was extended to situations with more than two time series. Such a procedure where models are developed bottom up to describe relations is hardly compatible with the economic approach of theorising where – at least in principle – all relevant variables of a system are treated jointly. For example, starting out from the general equilibrium theory as the core of economic theory, all quantities and prices in a market are simultaneously determined. This implies that, apart from the starting conditions, everything depends on everything, i.e. there are only endogenous variables. For example, if we consider a single market, supply and demand functions simultaneously determine the equilibrium quantity and price.

Keywords: Forecast Error; Impulse Response Function; Variance Decomposition; Instantaneous Relation; Final Prediction Error (search for similar items in EconPapers)
Date: 2013
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Chapter: Vector Autoregressive Processes (2007)
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DOI: 10.1007/978-3-642-33436-8_4

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