Consider the investment/income/consumption system of Section 15.3.2 and fit a VAR(4) process to the.
Consider the investment/income/consumption system of
Section 15.3.2 and fit a VAR(4) process to the data.
(a) Determine 95% interval forecasts for all three
variables and forecast horizons h = 1, 2, 3 under the assumption of a known
true VAR order of p = 4 and under the assumption of an infinite order true
(b) Determine Φi and Θi impulse responses and
their asymptotic standard errors for i = 1, 2, 3, 4 under both the assumption
of a finite and an infinite true VAR order. Compare the estimated standard
errors obtained under the two alternative scenarios for all variables.