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# Re: st: structural var

 From anna steccati To statalist@hsphsun2.harvard.edu Subject Re: st: structural var Date Thu, 4 Mar 2010 09:39:26 +0100

```Thanks a lot for your clarification!

2010/3/4 Michael Hanson <mshanson@mac.com>

>
> On Mar 3, 2010, at 7:47 AM, anna steccati wrote:
>
> I need to estimate a structural VAR with 2 equations as follows:
>>
>> x(t)=x(t-1)+…+x(t-5)+y(t)+…+y(t-5)
>>
>> y(t)=y(t-1)+…+y(t-5)+x(t-1)+…+x(t-5)
>>
>>
>> The presence of the contemporaneous term y in the first equation makes it
>> impossible to estimate it with the var command.
>>
>> Is there a way to estimate the model with the SVAR command? Should I add
>> more identification restrictions?
>>
>
> Anna,
>
> If you need to estimate a structural VAR (as you state), then you need to
> use -svar-.  What you have proposed for your model is a simple two-equation
> recursive VAR -- it can be identified via a Choleski decomposition.  In the
> [TS] manual, look at the first example of a "short-run just-identified SVAR
> model." Your model is even simpler, as you have only two equations.  The
> identifying assumptions that A is lower triangular (i.e., the A(1,2) element
> is zero) and the two structural error terms are uncorrelated (using the
> identity for the variance matrix is only a normalization) gives enough
> restrictions to recover all the remaining structural parameters.  Note that
> is your case, the restriction is imposed on the y(t) equation (that is, x(t)
> has a coefficient of zero in the y(t) equation), which means it should be
> listed first in your -svar- command, given that A is lower triangular.
>
> In other words,
>
> matrix A = (1,0\.,1)
> matrix B = (.,0\0,.)
> svar y x, aeq(A) beq(B)
>
> ought to do the trick.
>
> Hope this helps,
> Mike
>
>
>
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