1. Suppose the residuals of a reducedform bivariate VAR are given by stie\") = 1 and 'UCLT(82t) = 0.5 and CO'U(1t,2t) = cov(egt,eu) = 0.25. Assume that the reduced form bivariate stationary VAR is given by: \"91: = 1-2 0-3 yltl + 31; 3/2: 0-6 0-3 y2t1 82 The reducedform errors are related to the structural errors through the B matrix such that 1 b121 at = 816; where 6,; are the structural shocks and the B matrix is given by l b 1 21 (i) Briey explain the e's are different from the 6's and why the e's cannot be considered as structural shocks [2 marks] (ii) Impose the restriction that ygt does not respond contemporaneously to a pure 6\" shock. Using this Choleski decomposition find the identied values of (J12, (J21, made\") and UGT