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A note on potential one-way policy instruments in cointegrated VAR systems

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  • Kurita, Takamitsu

Abstract

This note introduces the concept of potential one-way policy instruments in a cointegrated vector autoregressive (VAR) system in a manner validating super and strong exogeneity. Monte Carlo experiments are conducted to verify arguments for a policy-oriented interpretation of the system’s impact-matrix. This study provides useful insight into simulation exercises for macroeconomic policy.

Suggested Citation

  • Kurita, Takamitsu, 2018. "A note on potential one-way policy instruments in cointegrated VAR systems," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 55-59.
    • Handle: RePEc:eee:ecanpo:v:58:y:2018:i:c:p:55-59
    DOI: 10.1016/j.eap.2017.12.004
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    References listed on IDEAS

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    1. Soren Johansen & Katarina Juselius, 2001. "Controlling Inflation in a Cointegrated Vector Autoregressive Model with an Application to US Data," Discussion Papers 01-03, University of Copenhagen. Department of Economics.
    2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    3. Hunter, J., 1990. "Cointegrating exogeneity," Economics Letters, Elsevier, vol. 34(1), pages 33-35, September.
    4. Paruolo, Paolo, 2002. "Asymptotic Inference On The Moving Average Impact Matrix In Cointegrated I (2) Var Systems," Econometric Theory, Cambridge University Press, vol. 18(3), pages 673-690, June.
    5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    6. 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 545-568, November.
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    Cited by:

    1. Tabaghdehi, Seyedeh Asieh H. & Hunter, John, 2020. "Long-run price behaviour in the gasoline market - The role of exogeneity," Journal of Business Research, Elsevier, vol. 116(C), pages 620-627.

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    More about this item

    Keywords

    Super and strong exogeneity; Cointegrated vector autoregressive models; Control theory; Policy instruments;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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