VAR (Forecast/Analyze) Wizard

The VAR (Forecast/Analyze) Wizard on the Time Series menu provides a convenient way to generate forecasts, impulse responses, variance decompositions, and historical decompositions for Vector Autoregression models, and other multi-equation systems.

When you select the Wizard, RATS displays a dialog box like this.

The Wizard provides the following fields:

Model

Use this field to select the MODEL you want to estimate. This will normally be a VAR model defined using a SYSTEM instruction or the VAR (Setup/Analyze) Wizard, but it can actually be any MODEL. We have selected a model called CANMODEL in the example above.

Action

This field selects the type of forecasting or analysis that will be performed. The choices are:

Forecast (dynamic)	Generates a FORECAST instruction that produces dynamic forecasts.
Forecast (static)	Generates a FORECAST instruction with a STATIC option, to produce static forecasts.
Impulse Responses	Generates an IMPULSE command to produce impulse responses.
Error Decomposition	Generates an ERRORS instruction to produce a variance decomposition.
Random (Normal) Simulation	Generates a SIMULATE command to produce random normal simulations.
Historical Decomposition	Generates a HISTORY instruction to produce an historical decomposition.

Forecasts to, Results to, Simulations to

The name of this field varies depending on your choice for Action. You can use it to save forecasts, impulse responses, error decompositions, simulations, or historical decompositions to a vector of series. We have entered the name myforecasts in this example.

Std Errors, Errors to

You can use this field to save the standard errors from a dynamic forecast or error decomposition, or the errors from a static forecast to a VECTOR of SERIES.

Start and End

You can use these fields to specify the range of entries for which you wish to compute forecasts, simulations, or historical decompositions. These are disabled when you have selected "Impulse Responses" or "Error Decomposition" in the Action field.

Steps

You can use the Steps field to indicate the number of steps (periods) for which you wish to compute results.

For the forecasting, simulation, and historical decomposition choices: If you only specify a value for Steps, computations will begin with the first period after the end of the most recent estimation range. If you prefer, you can use the Start field to specify a different starting period (leaving the End field blank and using Steps to control then number of periods computed).

For the "Impulse Responses" or "Error Decomposition" choices, just enter the number of steps you want to compute.

Print/Show

Use this field to display the forecasts to the Output window ("To Output"), to a new spreadsheet-style window ("To Separate Window"), or to suppress the displayed output ("None"). If you choose To Separate Window, a Window Title field appears that you can use to enter a title for the window.

Covariance Matrix, Input Matrix

These fields are displayed under the Action box if you select "Impulse Responses", "Error Decomposition", "Random (Normal) Simulation", "Historical Decomposition".

With default choice for Covariance Matrix of "Matrix from Model", RATS will use the covariance matrix associated with the model for simulations, or a Cholesky factorization of that matrix for impulse responses, error decompositions, and historical decompositions.

The other choices are "Input Covariance Matrix" and "Input Factor Matrix". When you select either of these, RATS will display an Input Matrix field. Use this to enter the desired covariance matrix or factor matrix (such as one computed using CVMODEL).