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

What is investment demand, Q. What is Investment demand? Investment de...

Q. What is Investment demand? Investment demand  Investment I(r) is assumed to be negatively related to the real interest rate r Total dema

Relationship between the interest rate and the bond price, Relationship bet...

Relationship between the interest rate and the bond price Note that the higher the issue price, the lower the interest rate. Similarly when the price of a government bond incr

Shortage, Shortage, Surplus and Price Mechanism: A shortage is the situ...

Shortage, Surplus and Price Mechanism: A shortage is the situation in which the demand exceeds supply, which means producers are unable to meet the market demand for the produc

State about the central bank and monetary policy, Central bank and monetary...

Central bank and monetary policy By monetary policy we mean the policy directed at controlling the money supply and the interest rates. In most countries, the central bank is r

Trade cycle, discus the various measures that may be taken by a firm to cou...

discus the various measures that may be taken by a firm to counteract the evil effect of a trade cycle

How can an economic development be measured, How can an economic developmen...

How can an economic development be measured? The UN has developed an extensively accepted set of indices to measure development in opposition to a mix of composite (element or

Assingment, a complete demend funtion equation

a complete demend funtion equation

Recent study of long distance phone calls, A recent study of long distance ...

A recent study of long distance phone calls made from WPU, showed that the length of the calls follows the normal probability distribution with a mean of 3.2 minutes per call and a

What is national income, Recognize which of the following purchases is coun...

Recognize which of the following purchases is counted as a part of NI: a) Tata motors purchases tire from Good year to equip latest Indica. b) Tata motors purchases tires fr

Determine the term - hot money, Determine the term - hot money A large ...

Determine the term - hot money A large 'hot money' inflow shifts the demand curve for currency to the right, leading to exchange rate rising and to an overvalued exchange rate

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