Cushman Zha JME 1997

This is a replication file for Cushman and Zha(1997. This is a rather large (11 variable) structural VAR with a set of four variables treated as exogenous, and thus left out of the lag structure. The "near-VAR" structure for this complicates the Monte Carlo integration because the marginal likelihood of the covariance matrix depends upon the observed covariance matrix of the residuals at the current draws for the lag coefficients rather than the observed covariance matrix at the OLS estimates only. Also complicating this is the size of the model—over 1200 coefficients—which makes the sampling method in the MONTENEARSVAR.RPF program nearly unusable because of the time required.

This uses a very efficient sampling method which is specific to the two-block near-VAR, where one set of regressors is a subset of the other.

The original paper had some technical errors in its sampling procedure, so the results from this differ (mainly in the width of the confidence bands).

The data are partitioned into the seven series of "domestic" (Canadian) data, and four series of US and World data. All are in logs except the two interest rates:

TBILL	Short-term Canadian treasury bill rate
EXC	(log) CAN$/US$ exchange rate
EXPO	Bilateral (US-Canada) exports deflated by Canadian CPI
IMPHS	Bilateral (US-Canada) imports deflated by Canadian CPI
CPI	Canadian CPI
M1	Canadian money supply
IP	Canadian IP
FFRUS	US Federal Funds Rate
CPIUS	US CPI
IPUS	US IP
WXCP	World Commodity Price Index

The structural VAR is an "A" form model for the seven domestic variables (which can include cross effects with the four outside variables), with a simple Cholesky model for the outside variables, which have no cross effects with the domestic variables.