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Constructing structural VAR models with conditional independence graphs

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  • Oxley, Les
  • Reale, Marco
  • Wilson, Granville Tunnicliffe

Abstract

In this paper graphical modelling is used to select a sparse structure for a multivariate time series model of New Zealand interest rates. In particular, we consider a recursive structural vector autoregressions that can subsequently be described parsimoniously by a directed acyclic graph, which could be given a causal interpretation. A comparison between competing models is then made by considering likelihood and economic theory.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematics and Computers in Simulation (MATCOM).

Volume (Year): 79 (2009)
Issue (Month): 9 ()
Pages: 2910-2916

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Handle: RePEc:eee:matcom:v:79:y:2009:i:9:p:2910-2916

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Web page: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/

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Keywords: Graphical models; Directed acyclic graphs; Term structure; Causality;

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References

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  1. M. Camarero & J. Ordonez & C. R. Tamarit, 2002. "Monetary transmission in Spain: a structural cointegrated VAR approach," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2201-2212.
  2. Steffen L. Lauritzen & Thomas S. Richardson, 2002. "Chain graph models and their causal interpretations," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 64(3), pages 321-348.
  3. Angelo Melino, 1986. "The Term Structure of Interest Rates: Evidence and Theory," NBER Working Papers 1828, National Bureau of Economic Research, Inc.
  4. Bruneau, Catherine & Jondeau, Eric, 1999. " Long-Run Causality, with an Application to International Links between Long-Term Interest Rates," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 545-68, November.
  5. Fabio C. Bagliano & Carlo A. Favero, . "Measuring Monetary Policy with VAR Models: an Evaluation," Working Papers 132, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Bessler, David A. & Fuller, Stephen W., 2000. "Railroad wheat transportation markets in the central plains: modeling with error correction and directed graphs," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(1), pages 21-39, March.
  7. Drakos, Konstantinos, 2003. "The term structure of deviations from the interest parity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(1), pages 57-67, February.
  8. Tom Engsted & Ken Nyholm, 2000. "Regime shifts in the Danish term structure of interest rates," Empirical Economics, Springer, vol. 25(1), pages 1-13.
  9. David A. Bessler & Seongpyo Lee, 2002. "Money and prices: U.S. Data 1869-1914 (A study with directed graphs)," Empirical Economics, Springer, vol. 27(3), pages 427-446.
  10. Cuthbertson, Keith, 1996. "The Expectations Hypothesis of the Term Structure: The UK Interbank Market," Economic Journal, Royal Economic Society, vol. 106(436), pages 578-92, May.
  11. Saghaian, Sayed H. & Hasan, Mohamad F. & Reed, Michael R., 2002. "Overshooting Of Agricultural Prices In Four Asian Economies," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(01), April.
  12. Granville Tunnicliffe Wilson & Marco Reale, 2008. "The sampling properties of conditional independence graphs for I(1) structural VAR models," Journal of Time Series Analysis, Wiley Blackwell, vol. 29(5), pages 802-810, 09.
  13. David Archer & Andy Brookes & Michael Reddell, 1999. "A cash rate system for implementing monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
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Cited by:
  1. Fragetta, Matteo, 2010. "Monetary Policy and Identification in SVAR Models: A Data Oriented Perspective," MPRA Paper 20616, University Library of Munich, Germany.
  2. Matteo Fragetta & Giovanni Melina, 2010. "The Effects of Fiscal Shocks in SVAR Models: A Graphical Modelling Approach," Birkbeck Working Papers in Economics and Finance 1006, Birkbeck, Department of Economics, Mathematics & Statistics.
  3. Matteo Fragetta & Giovanni Melina, 2013. "Identification of monetary policy in SVAR models: a data-oriented perspective," Empirical Economics, Springer, vol. 45(2), pages 831-844, October.

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