The RATS Software Forum

The procedure MONTEZHA.PRC shows how to implement Zha's procedure for overidentified BVAR. Well the code seems to work pretty well when the number of variables is exactly 6. When I run the code with more than 6, e.g., 7 variables, I got the following error message:

## MAT2. Matrices with Dimensions 6 x 1 and 7 x 1 Involved in %DOT Operation
The Error Occurred At Location 0102
Line 5 of loop/block

After some time I figured out that the problem seems to be related to the "deltas". The original code shows the following:

dec vect deltas(6)
compute deltas=||4.0,1.0,3.0,2.0,0.0,3.0||
ewise deltas(i)=%nobs-ncoef+(deltas(i)+3)
compute delta=3.5


When I change this piece of code to:

dec vect deltas(7)
compute deltas=||4.0,1.0,3.0,2.0,0.0,3.0,0.0||
ewise deltas(i)=%nobs-ncoef+(deltas(i)+3)
compute delta=4

The code works. Although I understand that the number of deltas must be consistent with the number of variables (right?), I do not know what the numbers in
"compute deltas=||4.0,1.0,3.0,2.0,0.0,3.0,0.0||" actually mean. Should the user define them? What's the intuition behind? Theory???

What are they? How should I choose the numbers? Why the sequence "4.0, 1.0, 3.0, 2.0,0.0,3.0" was chosen? For my specific problem (7 variables VAR) I randomly chosed the 7th number to be 0.0, but I have no idea how to pick a number for that.

Any help will be appreciated.

Thanks

Those input deltas give the count of the number of free parameters in a column. In that example:
It's the minimum number to guarantee an integrable posterior.

After all the suggested modifications, the procedure MONTEZHA.PRC works fine with 7 variables. Nevertheless, each time that I run the same code with the same data the covariance matrix change, and so do the responses function and forecast error. I am not sure if that is ok or there are a problem.

I would appreciate any advice.

Thanks a lot!

What covariance matrix is changing? It's a Monte Carlo integration program, so the error bands will change from run to run unless you use a SEED instruction.

MONTEZHA is from an older version of RATS and a modernized version is available for version 7 or later with MONTESVAR.

The matrix changing is the "swish" which, according to my understanding, is the var-cov matrix of the SVAR. I will try with MONTESVAR procedure. Thanks !

In MONTEZHA, SWISH is a factor of a draw for sigma so it does change as you do draws. The covariance matrix of the OLS residuals is VMAT.