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A structural cointegrating VAR approach to macroeconometric modelling

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

    ()

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.

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

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Length: 32
Date of creation: Jan 1999
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Handle: RePEc:edn:esedps:8
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