Lag selection in subset VAR models with an application to a US monetary system
Alternative modeling strategies for specifying subset VAR models are considered. It is shown that under certain conditions a testing procedure based on t-ratios is equivalent to sequentially eliminating lags that lead to the largest improvement in a prespecified model selection criterion. A Monte Carlo study is used to illustrate the properties of different procedures. It is found that the differences between alternative strategies are small. In small samples, the strategies often fail to discover the true model. Nevertheless, using subset strategies results in models with improved forecast precision. To illustrate how these subset strategies can improve results from impulse response analysis, a VAR model is used to analyze the effects of monetary policy shocks for the U.S. economy. While the response patterns from full and subset VARs are qualitatively identical, confidence bands from the unrestricted model are considerably wider. We conclude that subset strategies can be useful modeling tools when forecasting or impulse response analysis is the main objective.
|Date of creation:||2000|
|Contact details of provider:|| Postal: Spandauer Str. 1,10178 Berlin|
Web page: http://www.wiwi.hu-berlin.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999.
"Comparison of Bootstrap Confidence Intervals for Impulse Responses of German Monetary Systems,"
CEPR Discussion Papers
2208, C.E.P.R. Discussion Papers.
- Benkwitz, Alexander & L tkepohl, Helmut & Wolters, J rgen, 2001. "Comparison Of Bootstrap Confidence Intervals For Impulse Responses Of German Monetary Systems," Macroeconomic Dynamics, Cambridge University Press, vol. 5(01), pages 81-100, February.
- Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999. "Comparison of bootstrap confidence intervals for impulse responses of German monetary systems," SFB 373 Discussion Papers 1999,29, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Alexander Benkwitz & Michael Neumann & Helmut Lutekpohl, 2000. "Problems related to confidence intervals for impulse responses of autoregressive processes," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 69-103.
- Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994.
"The effects of monetary policy shocks: evidence from the flow of funds,"
Federal Reserve Bank of Dallas, issue Apr.
- Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
- Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the Flow of Funds," Working Paper Series, Macroeconomic Issues 94-2, Federal Reserve Bank of Chicago.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:200037. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.