Mixture of long and short run restrictions in VAR

[Ithaca]

Hello there,

Does anyone know how to perform an VAR with mixture of long and short run restrictions? Likes the one in Gali (1992)? Many thanks.

[TomDoan]

Hello there,

Does anyone know how to perform an VAR with mixture of long and short run restrictions? Likes the one in Gali (1992)? Many thanks.

I'm not sure why we haven't posted this, but I believe it's correct.

Code: Select all

*
* Replication file for Gali, "How Well Does the IS-LM Model Fit Postwar U.S.
* Data", QJE 1992, vol 107, no. 2, pp 709-738.
*
open data galiqje1992.rat
calendar(q) 1954
all 1987:3
*
* Use the first month in each quarter in compacting the monthly data
*
data(format=rats,select=1) / gnp tb3 m1 cpi
*
set logy = log(gnp)
set inf  = 400.0*log(cpi/cpi{1})
set mgr  = 400.0*log(m1/m1{1})
set rr   = tb3-inf
set rmgr = mgr-inf
*
@dfunit(det=trend) logy 1955:1 *
@dfunit tb3 1955:1 *
@dfunit inf 1955:1 *
@dfunit mgr 1955:1 *
@dfunit rr  1955:1 *
@dfunit rmgr 1955:1 *
*
@ppunit(det=trend,lags=3) logy 1955:1 *
@ppunit(lags=3) tb3 1955:1 *
@ppunit(lags=3) inf 1955:1 *
@ppunit(lags=3) mgr 1955:1 *
@ppunit(lags=3) rr 1955:1 *
@ppunit(lags=3) rmgr 1955:1 *
*
boxjenk(diffs=1,ma=1,constant) logy 1955:1 *
boxjenk(diffs=1,ma=1,constant) tb3 1955:1 *
boxjenk(diffs=1,ma=1,constant) inf 1955:1 *
boxjenk(diffs=1,ma=1,constant) mgr 1955:1 *
boxjenk(diffs=1,ma=1,constant) rr 1955:1 *
boxjenk(diffs=1,ma=1,constant) rmgr 1955:1 *
*
set drate = tb3-tb3{1}
set ygr   = logy-logy{1}
*
diff(center) ygr   / cygr
diff(center) drate / cdrate
diff(center) rr    / crr
diff(center) rmgr  / crmgr
*
system(model=islm)
variables cygr cdrate crr crmgr
lags 1 to 4
end(system)
*
estimate
*
compute masums=inv(%varlagsums)
*
dec rect lr(4,4)
dec rect sr(4,4)
input sr
 . 0 0 .
 . . . .
 . . . .
 . . . .
input lr
 . 0 0 0
 . . . .
 . . . .
 . . . .
@shortandlong(sr=sr,lr=lr,masums=masums,rperp=rperp,noestimate) %sigma
compute bv=%vec(%bqfactor(%sigma,%varlagsums))
dec vect theta
compute theta=%ginv(rperp)*bv
*
dec frml[rect] bf af
frml bf = %vectorect(rperp*theta,4)
frml af = inv(bf(0))
*
nonlin(parmset=base) theta
nonlin(parmset=r6) af(0)(2,3)+af(0)(2,4)==0.0
nonlin(parmset=r7) af(0)(2,1)==0.0
nonlin(parmset=r8) af(0)(3,3)==0.0
*
cvmodel(parmset=base+r8,b=bf,iters=400) %sigma
cvmodel(parmset=base+r7,b=bf,iters=400) %sigma
cvmodel(parmset=base+r6,b=bf,iters=400) %sigma

[Ithaca]

Thank you, Tom.