Advanced Search
MyIDEAS: Login to save this paper or follow this series

A structural cointegrating VAR approach to macroeconometric modelling

Contents:

Author Info

  • A Garratt
  • K Lee
  • M H Pesaran
  • Yongcheol Shin

    ()

Abstract

In this paper we discuss the 'structural cointegrating VAR' approach to macroeconometric modelling and compare it to other approaches currently followed in the literature, namely the large-scale simultaneous equation macroeconometric models, the structural VARs, and the dynamic stochastic general equilibrium models. The structural cointegrating VAR approach has the attractive features that the estimated long-run relationships embedded in the model are theory consistent, and have a clear economic interpretation, and yet the short-run dynamics are flexibly estimated within a VAR framework. The approach is illustrated using a small quarterly macroeconometric model of the UK. The uses of the model in impulse response analysis and probability forecasting is also discussed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.econ.cam.ac.uk/faculty/pesaran/ni99.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Gina Reddie)
Download Restriction: no

Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 8.

as in new window
Length: 32
Date of creation: Jan 1999
Date of revision:
Handle: RePEc:edn:esedps:8

Contact details of provider:
Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh
Phone: +44(0)1316508361
Fax: +44(0)1316504514
Web page: http://www.econ.ed.ac.uk/
More information through EDIRC

Related research

Keywords: Structural Cointegrating VAR; Macroeconomic Modelling; Generalised Impulse Responses; Persistence Profiles; Probability Forecasts.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Hercowitz, Zvi & Sampson, Michael, 1991. "Output Growth, the Real Wage, and Employment Fluctuations," American Economic Review, American Economic Association, vol. 81(5), pages 1215-37, December.
  2. Minford, Patrick & Matthews, Kent & Marwaha, Satwant, 1979. "Terminal conditions as a means of ensuring unique solutions for rational expectations models with forward expectations," Economics Letters, Elsevier, vol. 4(2), pages 117-120.
  3. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," RCER Working Papers 155, University of Rochester - Center for Economic Research (RCER).
  4. Garratt, Anthony & Kevin Lee & M Hashem Pesaran & Yongcheol Shin, 2002. "Forecast Uncertainties In Macroeconometric Modelling: An Application to the UK Economy," Royal Economic Society Annual Conference 2002 82, Royal Economic Society.
  5. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  6. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Modeling money," Working Paper Series, Macroeconomic Issues WP-97-17, Federal Reserve Bank of Chicago.
  7. Clarida, R. & Gali, J., 1993. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," Discussion Papers 1993_25, Columbia University, Department of Economics.
  8. Pesaran, M. H. & Smith, R. P., 1985. "Evaluation of macroeconometric models," Economic Modelling, Elsevier, vol. 2(2), pages 125-134, April.
  9. Brayton, Flint & Levin, Andrew & Lyon, Ralph & Williams, John C., 1997. "The evolution of macro models at the Federal Reserve Board," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 43-81, December.
  10. Plosser, Charles I, 1989. "Understanding Real Business Cycles," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 51-77, Summer.
  11. Jeffrey C. Fuhrer & C. Hoyt Bleakley, 1996. "Computationally efficient solution and maximum likelihood estimation of nonlinear rational expectation models," Working Papers 96-2, Federal Reserve Bank of Boston.
  12. Ando, Albert & Modigliani, Franco, 1969. "Econometric Analysis of Stabilization Policies," American Economic Review, American Economic Association, vol. 59(2), pages 296-314, May.
  13. Christiano, Lawrence J & Eichenbaum, Martin & Marshall, David, 1991. "The Permanent Income Hypothesis Revisited," Econometrica, Econometric Society, vol. 59(2), pages 397-423, March.
  14. repec:sae:niesru:v:156:y::i:1:p:72-79 is not listed on IDEAS
  15. repec:sae:niesru:v:156:y::i:1:p:55-62 is not listed on IDEAS
  16. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
  17. Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics 9811, Faculty of Economics, University of Cambridge.
  18. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  19. Peter C.B. Phillips, 1988. "Optimal Inference in Cointegrated Systems," Cowles Foundation Discussion Papers 866R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
  20. Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 117-143.
  21. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  22. Cooley, T.F. & Greenwood, J. & Yorukoglu, M., 1995. "The Replacement Problem," UWO Department of Economics Working Papers 9508, University of Western Ontario, Department of Economics.
  23. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  24. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
  25. Pesaran, M. Hashem & Smith, Ron, 1995. "The role of theory in econometrics," Journal of Econometrics, Elsevier, vol. 67(1), pages 61-79, May.
  26. Hall, Stephen, 1995. "Macroeconomics and a Bit More Reality," Economic Journal, Royal Economic Society, vol. 105(431), pages 974-88, July.
  27. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  28. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  29. Mellander, Erik & Vredin, A & Warne, A, 1992. "Stochastic Trends and Economic Fluctuations in a Small Open Economy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(4), pages 369-94, Oct.-Dec..
  30. Martin Eichenbaum & Lawrence J. Christiano, 1992. "Liquidity Effects, Monetary Policy, and the Business Cycle," NBER Working Papers 4129, National Bureau of Economic Research, Inc.
  31. Garratt, A. & Lee, K. & Pesaran, M. H. & Shin, Y., 1998. "A Long-run Structural Macro-econometric Model of the UK," Cambridge Working Papers in Economics 9812, Faculty of Economics, University of Cambridge.
  32. Robert B. Litterman & Laurence M. Weiss, 1984. "Money, real interest rates, and output: a reinterpretation of postwar U.S. data," Staff Report 89, Federal Reserve Bank of Minneapolis.
  33. Pagan, Adrian, 1987. " Three Econometric Methodologies: A Critical Appraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 1(1), pages 3-24.
  34. Stadler, George W, 1990. "Business Cycle Models with Endogenous Technology," American Economic Review, American Economic Association, vol. 80(4), pages 763-78, September.
  35. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  36. F. Brayton & P. Tinsley, 1996. "A guide to FRB/US: a macroeconomic model of the United States," Finance and Economics Discussion Series 96-42, Board of Governors of the Federal Reserve System (U.S.).
  37. S. Levtchenkova & A. R. Pagan & J. C. Robertson, 1998. "Shocking Stories," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 507-532, December.
  38. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  39. Turner, David S, 1991. "The Determinants of the Nairu Response in Simulations on the Treasury Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(3), pages 225-42, August.
  40. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  41. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  42. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
  43. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  44. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  45. Kenneth Kasa, 2000. "Forecasting the Forecasts of Others in the Frequency Domain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 726-756, October.
  46. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  47. Wickens, Michael, 1995. "Real Business Cycle Analysis: A Needed Revolution in Macroeconometrics," Economic Journal, Royal Economic Society, vol. 105(433), pages 1637-48, November.
  48. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," NBER Working Papers 3974, National Bureau of Economic Research, Inc.
  49. Brayton, Flint & Mauskopf, Eileen, 1985. "The federal reserve board MPS quarterly econometric model of the US economy," Economic Modelling, Elsevier, vol. 2(3), pages 170-292, July.
  50. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
  51. Wren-Lewis, Simon, et al, 1996. "The Macroeconomic Effects of Fiscal Policy: Linking an Econometric Model with Theory," Economic Journal, Royal Economic Society, vol. 106(436), pages 543-59, May.
  52. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  53. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  54. M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
  55. Murphy, C W, 1988. "An Overview of the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 175-99, Supplemen.
  56. Ray C. Fair, 1993. "Estimating Event Probabilities from Macroeconometric Models Using Stochastic Simulation," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 157-178 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:edn:esedps:8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gina Reddie).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.