From VAR models to Structural VAR models

Abstract

In this chapter we introduce the philosophy, the basic concepts and definitions of VAR analysis (sections 1.1 and 1.2). After that, in section 1.3 we discuss the problems of VAR estimation and in section 1.4 we describe the possible uses of VAR models. Then in section 1.5 we start dealing with Structural VAR analysis, pointing out the main features of the different classes of Structural VAR models, their likelihood functions (section 1.6) and their differences with respect to the standard simultaneous equations models (section 1.7). We conclude this chapter by providing examples of Structural VARs taken from the applied econometric literature (section 1.8).