Lag length criteria, Macroeconomics

Assignment Help:

In order to estimate aVAR, alag length must be used in the estimation. There are many different criteria which can be used to signal the ideal lag length to use.Asteriou & Hall (2011) explain that the following three statistics are mainly used.

The first criterion which assesses the goodness of fit of the model is the Akaike Information criterion, (AIC), developed by Akaike (1974) and is written;

AIC=(RSS/n) e(2k/n)

The Schwarz Criterion (SC) developed by Schwarz (1978) with the following equation;

SC=(RSS/n) e(k/n)

The SCstatistic is likely to penalise complexity within models.
Finally, the Hannan and Quin criterion, (HQC);

HQC=(RSS/n) (ln?n)(2k/n)

The method of selecting the ideal lag length will be the lag number which minimises the statistics of each criterion. Should the tests produce conflicting results, then an explanation into which test that I will use will accompany the results.


Related Discussions:- Lag length criteria

calculate the annual cost and present value, National Marine Fisheries Ser...

National Marine Fisheries Service is considering closing a large area of federal waters to fishing in Alaska due to negative interactions of fishing with endangered Steller sea lio

Calculate profit-maximizing price and quantity, A monopolist faces the foll...

A monopolist faces the following demand function for its product: Q = 45 - 5P The fixed costs of the monopolist are $12 and the variable costs are $5 per unit. a) What are the pro

Rice production is land intensive, If rice production is land intensive and...

If rice production is land intensive and computer production is labor intensive, though both good require some land and labor, the two-good production possibilities frontier will c

Describe the relation of money with wealth and income, Describe the relatio...

Describe the relation of money with wealth and income It is very possible to have a high income but no money and no wealth, or to be very wealthy and have a lot of money but no

MR, Question 1: Consider a two-period, two-person pure exchange economy. Ut...

Question 1: Consider a two-period, two-person pure exchange economy. Utility functions and endowments are given as follows. u1(x0; x1) = (x0x1)2 and e1 = (18; 4) u2(x0; x1) = ln x0

Tariffs & quotas, the suitability of utilising a policy of tariffs and quot...

the suitability of utilising a policy of tariffs and quotas given the case of perfect competition.

New equilibrium price also quantity, Take a look at the sugar market: US d...

Take a look at the sugar market: US demand: Q=60-2/3 P US domestic supply: Q=P Also, the US could import any quantity from world producers at (US$) 10/cents per lb a) In a sc

Money illusion, A significant argument for the augmentation has to do with ...

A significant argument for the augmentation has to do with concept of money illusion. Money illusion means that you care about nominal rather than real amounts. Imagine that your s

Quantity Theory of Money, 2. Use the Quantity Theory of Money to explain in...

2. Use the Quantity Theory of Money to explain inflation (a increase in the overall level of prices). (4 points) If you were a member of the Federal Reserve Board of the Governor

Substitution and income effects in units, Individual A has UA(XA,YA)=lnXA+2...

Individual A has UA(XA,YA)=lnXA+2YA and has $500. PX=5 and PY =10. (a) Find the optimum. Show that it is indeed the maximum. (b) PX=10. Find the new optimum. (c) Calculate

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd