Few days ago I downloaded Eviews 8.1 in order to achieve the last chapter of my master thesis. I have never used it before and try to go on with it. I'am actually trying to implement a bi-varied Vector Autoregressive (VAR). It's a unrestricted VAR with two variables: the GDP growth which is yt= log_GDP(t)-log_GDP(t-1) and the inflation which is pt= log_GDP deflator(t)-log_GDPdeflator(t-1). I take the first log difference of the variables in order to make them stationnary. My purpose is to evaluate the impact of a supply shock and a demand shock on this two variables, knowing that shocks on the demand have no long-run effects on the GDP.
Here begins my issues, while I was discovering the program I'have heard about the long and short run restrictions. This is my point, first of all I have implented a model with short run restrictions by building two matrices assuming one with a digonal of 1's because of the univariated character of the variance of the forecast errors and then a second orthogonal one with a digonal of "NA" and 0 anywhere else because the covariance of my forecast errors are nul.
When I realised that I could force the long run response of a shock in the demand on the yt (growth of GDP) to be nul, I decided to do it by implementing a long run matrix with the response coefficient of y to the demand shock equals to 0 and others to "NA". However, as you know it's not possible to implement both short and long run restrictions so I am currently keeping the long run one, but I don't feel that satisfied with it. I'have got the feeling that I'am missing something in the process to write this kind of model. I am actually wondering what about the variance and covariance of my forescast errors if the the short run restrictions are suppoosed to fix this. I feel like what I did it's "too simple" and don't describe the reality I want my model to show me.
Perhaps, I don't really understand how to use these restrictions. If anybody could help me by telling me if I am wrong or not and If am, how could I get it, please? He would be blessed!
