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A Structural Cointegrating VAR Approach to Macroeconometric Modelling

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This paper discusses the ?structural cointegrating VAR? approach to macroeconometric modelling and compares 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 co- integrating 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 macroeconomic model of the UK, and its use in impulse response analysis and probability forcasting is discussed.

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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9823.

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Date of creation: Nov 1998
Handle: RePEc:cam:camdae:9823
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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