Misspecifications in vector autoregressions and their effects on impulse responses and variance decompositions

Braun, Phillip; Mittnik, Stefan

doi:10.1016/0304-4076(93)90029-5

Cited by 96 publications

(53 citation statements)

References 10 publications

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“…A commonly proposed solution to fiscal foresight is to enlarge the information set of the VAR model to include a variable proxying for agents' expectations about future fiscal policy changes using Expectational VARs (EVARs). Braun and Mittnik, 1993). This affects the identification of the disturbances, the variance covariance decomposition, and the derived impulse response functions (IRFs).…”

Section: Troubles With Small Fiscal Varsmentioning

confidence: 99%

Government purchases reloaded: Informational insufficiency and heterogeneity in fiscal VARs

Ellahie

Ricco

2017

Journal of Monetary Economics

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Using a large Bayesian VAR, we approximate the flow of information received by economic agents to investigate the effects of changes to government purchases. We document robust evidence that informational insufficiency in conventional models explains inconsistent results across samples and commonly employed identifications in recursive Structural VARs and Expectational VARs. Furthermore, we report heterogeneous effects of components of government purchases. While aggregate government purchases do not appear to produce strong stimulative effects with output multiplier around 0.7, government investment components have multipliers well above unity. State and local consumption, which captures investment in education and health, elicits a strong response.JEL classification: C32, E32, E62.

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Section: Troubles With Small Fiscal Varsmentioning

confidence: 99%

Government purchases reloaded: Informational insufficiency and heterogeneity in fiscal VARs

Ellahie

Ricco

2017

Journal of Monetary Economics

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“…The lag length determination is important as when the lag length differs from its true value, the estimates of a VAR turn out to be inconsistent, so are the impulse response functions (Braun & Mittnik, 1993 Cointegration analysis is inherently multivariate, as a single time series cannot be cointegrated. If two time series data are non-stationary, i.e.…”

Section: To Find Out the Optimal Lag-length Of The Vector Autoregressmentioning

confidence: 99%

Impact of Trade Openness, FDI Inflows and Total Exports on Economic Growth of India: An Econometric Approach

Mitra¹,

Khan²

2014

IOSRJEF

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“…Lütkepohl (1993) indicated that selecting a higher order lag length than the true one causes an increase in the mean square forecast errors of the VAR and that under…tting the lag length often generates autocorrelated errors. Braun and Mittnik (1993) showed that impulse response functions and variance decompositions are inconsistently derived from the estimated VAR when the lag length di¤ers from the true length. When cointegration restrictions are considered in the model, the e¤ect of lag length selection on the cointegration tests has been demonstrated.…”

Section: Introductionmentioning

confidence: 99%

Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features

Gutierrez

Souza²,

Guillén

2009

Brazilian Review of Econometrics

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An important aspect of empirical research based on the vector autoregressive (VAR) model is the choice of the lag order, since all inferences in this model depend on the correct model speci…cation. There have been many studies on how to select the lag order of a nonstationary VAR model subject to cointegration restrictions. In this work, we consider an additional weak-form (WF) restriction of common cyclical features in the model to analyze the appropriate way to select the correct lag order. We use two methodologies: the traditional information criteria (AIC, HQ and SC) and an alternative criterion (IC(p; s)) that selects the lag order p and the rank structure s due to the WF restriction. We use a Monte Carlo simulation in the analysis. The results indicate that the cost of ignoring additional WF restrictions in vector autoregressive modeling can be high, especially when the SC criterion is used.

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Misspecifications in vector autoregressions and their effects on impulse responses and variance decompositions

Cited by 96 publications

References 10 publications

Government purchases reloaded: Informational insufficiency and heterogeneity in fiscal VARs

Government purchases reloaded: Informational insufficiency and heterogeneity in fiscal VARs

Impact of Trade Openness, FDI Inflows and Total Exports on Economic Growth of India: An Econometric Approach

Selection of Optimal Lag Length in Cointegrated VAR Models with Weak Form of Common Cyclical Features

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