ECON217_HW_VAR - money supply a Interpret the coefficient...

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ECON217_HW_VAR 1. What is a VAR model? What are the stationarity conditions for a VAR model? What are the advantages/disadvantages of using a VAR model to analyze economic data? 2. a. Use a bivariate VAR(1) model to discuss and explain i) impulse response analysis, and ii) forecast error variance decomposition. b. Use a bivariate VAR(1) model to illustrate the relationship between the coefficients of a VAR model and their corresponding structural counterparts. 3. Use the VAR methodology to analyze the relationship between the quarterly real GDP and
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Unformatted text preview: money supply. a. Interpret the coefficient estimates for the VAR model. b. Test the hypotheses i) output causes money, and ii) money causes output. c. In conducting the impulse response analysis, consider the effects of a unit shock to output and, then, a unit shock to money. Interpret your result. d. Report and interpret the forecast error variance decomposition for both the output and money variables....
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