Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the (invertible) reduced-form VAR with $k$ variables: A(L)Y_t = u_t where A(L) is a lag polynomial and E_{u_t u_t'} = sigma, where sigma has

Consider the (invertible) reduced-form VAR with $k$ variables: A(L)Y_t = u_t where A(L) is a lag polynomial and E_{u_t u_t'} = \sigma, where \sigma has non-zero diagonal entries. Assume, that there are k structural shocks that drive the system. Assume that the researcher has knowledge of short-run restrictions in order to identify the structural shock, s_{t,j} of the system. Show that in order to identify s_{t,j} and in order to compute the IRFs with respect to that shock, the researcher doesn't have to identify the other structural shocks

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Management And Business Policy Toward Global Sustainability

Authors: Thomas L. Wheelen, J. David Hunger

13th Edition

9780132998079, 132998076, 978-0132153225

More Books

Students also viewed these Economics questions

Question

Why isn't the statement / home / alice ls - l valid?

Answered: 1 week ago