TITLE:
Does the Biased Coefficient Problem Plague the VAR Model?
AUTHORS:
Yunyun Lv
KEYWORDS:
Impulse Response Functions, The Biased Estimated Coefficients
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.3,
April
13,
2017
ABSTRACT: This
paper documents evidence to investigate if the explanatory variables are always
correlated with the error term in the vector autoregression (VAR) model because
of the property of the VAR model. I use Christiano et al.
(CEE, 2005) as an example to examine this argument empirically. According to
the findings of this paper, the impulse responses provided by the structural
VAR model may be derived from the biased estimates if we allow variables to be
correlated with each other through different horizons. It remains possible for
a skeptic to maintain some dominant views inferred from the biased coefficients
of the SVAR models.