The vector autoregressive methodology

introduction and some applications

Abstract

This working paper development the most recent topics in econometrics applied to the economics. Analyses to the methodological econometric VAR (vector autoregressive) since for C.Sims (1980) is a econometric model used to capture the evolution and interdependencies between multiple time series, generalizing the univariate AR models. All the variables in a VAR are treated symmetrically by including for each variable an equation explaining its evolution based on its own lags and the lags of all the other variables in the model. Based on this feature, C. Sims advocates the use of a VAR models as a theory free method to estimate economic relationships, thus being an alternative to the incredible identification restrictions in structural models. A VAR model describe the evolution of a set k variables (called endogenous variables) over the same sample period (t=1,………n) as a linear function of only their past th evolution. The variables are collected in a kx1 vector Y , which has as the i element Y the time t t it observation of variable Y. For example is PBI, the y is the value of PBI at t.