The RATS Software Forum

Dear Estima,

Let's say I estimate a VAR model over the period 1980-2007 and impose restrictions to identify the structural shocks. Now, let's say I want to take the model estimated for the 1980-2007 and use it to do a historical decomposition of the shocks over the period after 2007. That is, I want to use one period's estimated VAR and factorization and apply it to a subsequent period. Is this possible and if so, is there an example you can point me to? Thanks.

The basic calculation is the same as is required for doing historical decomposition with simulated coefficients. (Section 4.3 of the VAR e-course workbook). You have to recompute the residuals for the one period using the coefficients from the other (rather than using simulated coefficients).