SHORTANDLONG—Factors with short and long-run restrictions
Posted: Thu Jan 12, 2023 10:55 am
@ShortAndLong takes a covariance matrix, a set of sums of (moving average) lag coefficients from a VAR, and pattern matrices for short run and long run restrictions and produces either a factor of the covariance matrix (if the model is exactly identified) or a re-parameterization if the model as input underidentifies the model.
The basic model is u = Fv, where v are the structural shocks, restricted to be orthonormal, that is, Evv'=I. FF' is thus equal to sigma for a just identified model.
This was updated in August 2016 to provide additional diagnostics, include a test for failure of the Rubio-Ramirez-Waggoner-Zha counting rules and for redundant restrictions in the case of a VECM.
Detailed description
The basic model is u = Fv, where v are the structural shocks, restricted to be orthonormal, that is, Evv'=I. FF' is thus equal to sigma for a just identified model.
This was updated in August 2016 to provide additional diagnostics, include a test for failure of the Rubio-Ramirez-Waggoner-Zha counting rules and for redundant restrictions in the case of a VECM.
Detailed description