Re: [Gretl-users] Activating HAC does not work
On Mon, 25 Apr 2011, Artur Tarassow wrote:
I am just estimating some VAR models and would like to use robust
standard errors. I am using the following lines to set up HAC...
You're right, these won't work to produce HAC for a VAR. It's not
exactly a bug, but a semi-deliberate decision ;-)
That is, some time ago we replaced equation-by-equation estimation
of VARs by a matrix method that does the whole thing in one go. At
that time I rebuilt the HC variance estimator for the new method
but I didn't bother rebuilding the HAC estimator. The reason
(other than laziness) was that you'd generally expect a VAR to
include enough lags to make HAC redundant. (Stock and Watson, for
example, include several VARS in their undergraduate textbook and
they always use a robust variance estimator, but they never use
HAC for VARs: I asked them why not, and that's the answer they
gave me.)
Anyway, it's easy enough to re-enable HAC for VARs if anyone
really wants it. But if I do so, what should the default be?
Should VARs be treated like regular models on time-series data
with regard to the --robust option (that is, HAC unless you "set
force_hc on")? Or vice versa (with a new VAR-specific "set"
variable, "force_hac")?
What do people think?
Allin