Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Since their inception, VAR models have been at the centre of many controversies associated with econometric modelling. The recurring criticism throughout history is due to the model being a-theoretic. There is not an underlying theory which is attached to the model therefore it incorporates no prior information. Asteriou and Hall (2011) argue that since there are no initial restrictions on the models parameters, one could deduce that all variables have an effect on everything. However, statistical inference, namely, causality testing can be used to eliminate those variables which are deemed insignificant from the model. Another problem which can occur when using VAR is that the parameters will consume much of the degrees of freedom, insist Gujarati & Porter (2009). For example; if we had a 4 variable model and had chosen to use 8 lags, 32 lagged parameters will exist, which in addition to the constant would total 33. Should the sample size not be sufficiently large, the parameters will use too many degrees of freedom. This will lead to problems withthe estimation.
Finally, VAR cannot be used for policy analysis due to the lack of prior information and a-theoretic nature of the VAR model; therefore the results are incredibly problematic to interpret. However there are methods to overcome this problem. Supporters of the model suggest estimating the impulse response functions thus ascertaining the effects on the variables, should one of them be subject to a shock. There are some advantages to using VAR models. They are very simple to setup. Econometricians need not worry about which variables are endogenous and which are exogenous i.e. originating within or outside the model. Additionally the estimation is extremely simple; each equation can be estimated using the standard OLS method.
what are the function of budget
What are the Changes in the exchange rate Assume that United States is our home country and that current euro exchange rate in direct notation is SD= 1.5 (euro/USD). In indirec
Q. Money market with inflation and rising money supply? Figure: The money market with inflation and rising money supply If we let π M refer the growth rate in money
Suppose there is a simultaneous increase in the demand for diamonds and increase in the supply of diamonds. Which of the following will occur as a result of these simultaneous even
In 2004, Olentangy health care cost of capital was 6%. Its investments on a historical cost valuation basis are $80,000; on a replacement cost basis are $100,000. And on a current
uses of national income statistics
Cowboy Corporation is estimating its WACC. The firm's debt structure contains: (1) 30,100 long-term bonds with an 8.1% coupon, paid semiannually, a 10 years-to-maturity, and a $10
Derive that the complex amplitude of the double convex lens shown in the image below with focal length 1/f = (n-1 ) (1/R 1 - 1/R 2 ). Hint: we derived an plano convex lens in cla
Assume that Jimmy Cash has $2000 in his checking account and uses his checking card to withdraw $200 from his ATM machine. By what amount did M1 change from this individual transac
1. Consider the market for a particular type of computer memory chip. Would you expect the long-run (own-price) elasticity of supply to be larger or smaller than the short-run elas
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd