Short and Long Run Restrictions,Correlated Structural Shock

[abhishek]

Hi
I am trying to estimate a Structural VAR model with short and long run restrictions and I want one set of structural error to be correlated. Is it possible to do?

[TomDoan]

Yes, but it's usually the job of the short-run restrictions to get rid of the contemporaneous correlation. (That's how you end up identifying shocks when the long-run restrictions aren't enough).

[abhishek]

Hi Tom
Thanks for your reply. I need structural shocks to be correlated. Cover et.al.(2005) did this in a three variable set up. Can you tell me a bit about how to do it in Rats? Many Thanks

[abhishek]

Hi
They had a simple set up that was easy to solve. How to go when we have more number of variables?

[TomDoan]

Could you please give an actual reference?

[abhishek]

Thanks Tom. Please find the attached references.
Identifying aggregate demand and supply shocks in a small open economy: Walter Enders and Stan Hurn (2005)

Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR: Cover, Enders and Hueng (2003). Sorry I mentioned 2005 in my earlier post.

http://oep.oxfordjournals.org/content/59/3/411.full

[TomDoan]

See https://estima.com/forum/viewtopic.php?f=4&t=952

[abhishek]

Hi Tom

What is the correct format of AFRML? As I am getting error "Identifier AFRML is Not Recognizable". Can I write one element as b(1)*-0.5 where b(1) is the element, I am going to estimate.

[abhishek]

Hi Tom,

One more thing, how can we get VAR coefficients after model. I am not talking about print. I mean how we can use them in writing constraints.

[TomDoan]

Hi Tom,

One more thing, how can we get VAR coefficients after model. I am not talking about print. I mean how we can use them in writing constraints.

%VARLAGSUMS has all the information needed for doing long-run restrictions.

[TomDoan]

Hi Tom

What is the correct format of AFRML? As I am getting error "Identifier AFRML is Not Recognizable". Can I write one element as b(1)*-0.5 where b(1) is the element, I am going to estimate.

I assume because you named it something other than AFRML. The A option takes the form A=name of your FRML[RECT]. See the example in the other thread. Yes, you can use that as one element in the FRML.

[abhishek]

Thanks Tom.

I am getting this error. Can't I do this.

[abhishek]

I am trying a FIML on the lines of Keating (1990). I am not sure where Rats implements this with A restrictions.

[TomDoan]

Thanks Tom.

I am getting this error. Can't I do this.

Did you actually execute all those instructions? It looks like you tried to do the CVMODEL out-of-sequence. If you execute all those instructions, you can't get that error message.

Aside from that, that model can't possibly work---you have eight free parameters with five in the parameter set and three variances, which is two more than you can have for a three variable covariance matrix.

[TomDoan]

I am trying a FIML on the lines of Keating (1990). I am not sure where Rats implements this with A restrictions.

Again, I would ask you to give full references.