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A structural cointegrating VAR approach to macroeconometric modelling

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: Oct 1998
Date of revision:
Handle: RePEc:edn:esedps:8
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