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Money Growth and Inflation: Implications of Reducing the Bias of VAR Estimates

Author

Listed:
  • Brännström, Tomas

    (Department of Economic Statistics)

Abstract

A bivariate second-order VAR model of money growth and inflation is specified and estimatedby means of least squares. The bias of the parameter estimates is approximated in three ways and new, bias-reduced estimates are computed using the approximations. The effects of bias reduction on impulse-response functions and variance decompositions are found to be negligible. The effects of bias reduction on predictions, in particular on predicted inflation, are more substantial.

Suggested Citation

  • Brännström, Tomas, 1995. "Money Growth and Inflation: Implications of Reducing the Bias of VAR Estimates," SSE/EFI Working Paper Series in Economics and Finance 82, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0082
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    More about this item

    Keywords

    Vector autoregressive models; Bias reduction; impulse-response functions; variance decomposition; forecasts;
    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
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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