Money Growth and Inflation: Implications of Reducing the Bias of VAR Estimates

Tomas Brännström
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Tomas Brännström: Department of Economic Statistics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden.

No 82, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: A bivariate second-order VAR model of money growth and inflation is specified and estimatedby means of least squares. The bias of the parameter estimates is approximated in three ways and new, bias-reduced estimates are computed using the approximations. The effects of bias reduction on impulse-response functions and variance decompositions are found to be negligible. The effects of bias reduction on predictions, in particular on predicted inflation, are more substantial.

Keywords: Vector autoregressive models; Bias reduction; impulse-response functions; variance decomposition; forecasts (search for similar items in EconPapers)
JEL-codes: C32 C53 E37 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1995-11
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0082

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