A, B, C's (and D)'s for Understanding VARs
Jesus Fernandez-Villaverde (),
Juan F Rubio-Ramirez () and
Thomas Sargent ()
No 308, NBER Technical Working Papers from National Bureau of Economic Research, Inc
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,Sigma) determines a vector autoregression for observables available to an econometrician. We review circumstances under 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.
JEL-codes: E0 C11 C3 (search for similar items in EconPapers)
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Published as Jesús Fernández-Villaverde, Juan F. Rubio-Ramírez, Thomas J. Sargent, and Mark W. Watson, 2007. "ABCs (and Ds) of Understanding VARs," American Economic Review, vol. 97(3), pages 1021-1026.
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Journal Article: ABCs (and Ds) of Understanding VARs (2007)
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)
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