The RATS Software Forum

Hi,
Does anyone have a RATS code for
(a) identifying two permanent technology shocks using long-run restrictions ( as, for example, in Fisher (2006), "The Dynamic Effects of Neutral and Investment-Specific Shocks", Journal of Political Economy, Vol. 114, pp. 413-451, June 2006)
(b) Computing the conditional correlations between the variables in the trivariate or larger SVAR (similar to that done in the gali_aer.prg in the RATS EXAMPLES, which considers the bi-variate case)

Thanks.

The Fisher SVAR can be done simply with %BQFACTOR. The two restrictions are long-run loadings of

x 0 0 0 0
x x 0 0 0

for the I and N shocks respectively, with investment price and labor productivity as the first two variables in the VAR. Since none of the other shocks are of interest, you can finish the factorization by just the long-run loadings:

x 0 0 0 0
x x 0 0 0
x x x 0 0
x x x x 0
x x x x x

which can be computed directly using %BQFACTOR.

Thanks Tom. I am modifying the gali.prg file accordingly...