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Consider the following vector autoregressive model yt=β0 ∑t=1^k yt-i ut where yt is a p ×1 vector of variables determined by k lags of all p variables in the system, ut is a p ×1 vector of error terms, β0 is a p ×1 vector of constant term coefficients and are p ×p matrices of coefficients on the i th lag of y. 435 (a) If p=2, and k=3, write out all the equations of the VAR in full, carefully defining any new notation you use that is not given in the question. (b) Why have VARs become popular for
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SOLVED: (a) Consider the following vector autoregressive model:where is a p x 1 vector of variables determined by k lags of all p variables in the system, is a p x 1 vector of error terms, is a p x 1 vector of constant term coefficients, and are p matrices of coefficients on the lag of y:(i) If p = 2 and k = 3, write out all the equations of the VAR in full, carefully defining any new notation you use that is not given in the question.(ii) Why have VARs become popular for application in economic
SOLVED: (a) Consider the following vector autoregressive model:wher…
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