Can I estimate a VAR-X in GRETL?
by Daniel Ventosa-Santaulària
Hello everyone,
I am being asked to estimate a VAR-X; I would like to do it in GRETL, but I
don´t really know how.
My understanding of a VAR-X is the following: Suppose 3 variables, X, Y,
and Z, to be included in a VAR(1).
Yt = a1 Yt-1 + a2 Xt-1 +a3 Zt-1
Xt = a4 Yt-1 + a5 Xt-1 +a6 Zt-1
Zt = a7 Yt-1 + a8 Xt-1 +a9 Zt-1
Suppose further that Y is a macro variable from, say, the US, whilst X and
Y are macro variables from Mexico. I would like to assume that Y affects X
and W, but is not affected by X, and Y. Thus, what I need to do is to
restrict a2 = a3:
Yt = a1 Yt-1
Xt = a4 Yt-1 + a5 Xt-1 +a6 Zt-1
Zt = a7 Yt-1 + a8 Xt-1 +a9 Zt-1
Therefore, Y has its own AR equation. This is not exactly an exogenous
variables as defined in the GRETL VAR command. At most, what I can do with
GRETL command is:
Xt = a4 Yt-1 + a5 Xt-1 +a6 Zt-1
Zt = a7 Yt-1 + a8 Xt-1 +a9 Zt-1
But then I lose Y's equation. I could estimate separately the first
equation and then the other two in a regular VAR, but I was wondering if I
can directly estimate the VAR with the three variables and restrict two
specific parameters, as in the first set of equations. My final goal is to
estimate the IRF Yt -> Xt. Is this feasible in GRETL?
Thanks in advance.
Friendly,
D.
* Daniel Ventosa-Santaulària*
* Banco de México & **CIDE*
- http://www.ventosa-santaularia.com
