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Example of VECM with BQ restrictions and Error Bands
Posted: Sun Jan 29, 2012 10:23 pm
by macro_man
All,
Are there any examples of a VECM that uses Blanchard-Quah long-run restrictions and calculates error bands for the impulse response functions? Thanks.
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Mon Jan 30, 2012 12:32 pm
by TomDoan
KPSW4.RPF (from King, Plosser, Stock and Watson AER 1991) does Monte Carlo integration on a VECM with long-run restrictions. BQ itself isn't that interesting since if you have a two-variable VECM, if one variable has a long-run 0 restriction, the other has to as well.
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Mon Jan 30, 2012 3:28 pm
by macro_man
Thanks. Can you direct me to a resource that explains why this is so. My models have 6-8 variables, but the issue I assume still applies.
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Mon Jan 30, 2012 4:36 pm
by TomDoan
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Mon Feb 06, 2012 9:35 am
by macro_man
Tom,
I followed the ShortandLong example with VECM. Is there an example for the shortandlong where standard error bands are generated? Thanks.
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Mon Feb 06, 2012 10:18 am
by TomDoan
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Tue Mar 20, 2012 4:29 am
by carljames
I was actually having a hard time to determine the who permanete shock originates from, but it seems that you can't, huh?!
Honestly, it's a little confusing
Re: Example of VECM with BQ restrictions and Error Bands
Posted: Wed Mar 21, 2012 9:57 am
by TomDoan
carljames wrote:I was actually having a hard time to determine the who permanete shock originates from, but it seems that you can't, huh?!
Honestly, it's a little confusing
That's correct. The BQ restriction actually identifies the transitory shock---the permanent shock is whatever is orthogonal to that. You would need a more structural model than a simple VECM to identify the source of the permanent shock.