SVAR with scenarios

[27npg]

Hi,
I am trying to estimate a model of the Australian economy and its relationship with New Zealand (external) using open economy structural vector autoregressive (SVAR) model is employed with block exogenous assumption. The block exogenous assumption implies that the external variables can influence the domestic variables contemporaneously, but the domestic variables will have no effects on the external variables. A key component is that I can adjust scenarios in the external economy (e.g. reduction in
Policy rates) and test the effect on the domestic economy. Would the SVAR function allow me to do this or us there a better option?

[EViews Matt]

Hello,

That should be possible with little difficulty. While EViews' VAR object doesn't have an internal concept of scenarios as the MODEL object does, you can certainly reestimate and/or create multiple objects to explore however many possibilities you wish.

[27npg]

Thanks for this Matt. Apologies - one last question/confirmation. Will it allow me to make forecasts using the SVAR? I had read somewhere that for the model solution option, EViews always uses the reduced form VAR results meaning there would be no difference between FCs of the VAR and SVAR. Is there anyway around this for the purpose of forecasting?

[EViews Matt]

As a mathematical model, an SVAR is equivalent to its underlying (reduced-form) VAR. Consequently, there is no need to distinguish between the two for standard forecasting purposes. Once you've estimated a VAR in EViews you have all you need to produce a forecast, a further structural factorization would not change the results.

[27npg]

Cheers Matt!

[kzmh78]

Hi,
I wish to analyse impulse response for Similar Structural VAR model.
Is it possible to estimate a impulse response analysis and variance decomposition on the model object or system object?

[EViews Matt]

Hello,

Not automatically, no. You'd have to perform the calculations for such analyses yourself.

[kzmh78]

Thank you !