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Hi All,

I am currently trying to estimate a VAR with 3 variables (and suggested is roughly 20 lags), but have found out that I need to correct for heteroscedasticity and preferrably also for autocorrelation between my error terms. The dataset(s) contain over 20000 obs.

I am using Eviews 6. (if an easy solution in Eviews 7 exists I am able to use that as well)

Is there any way I can use Newey-West corrected standard-errors in my VAR and later plot the Impulse response and Variance-decomposition?
Or is there a way to plot the Impulse Responses and correct t-stats for Newey-West later?

Perhaps if I use OLS on all 3 equations first? Or if there is some piece of code that can help me?

Any help is much appreciated, If more information is needed let me know.

Many Thanks!

Fabian

There is nothing built in that will do it for you.

Thanks for the quick reply,

Is there any solution to this problem with a workaround in that case?
I have seen some papers where is stated that they use the Newey-West corrected standard errors when dealing with heteroskedastic and/or autocorrelated VAR residuals..

I am kind of stuck on this, so any suggestions are welcome, even if it's not that easy to implement

Thanks

I can't think of a workaround, especially if you want IRFs.

Thanks again,

Now say that I can remove the autocorrelation if I add more lags (which should not be to much of an issue given my rather large # of observations I think).
Is it then possible to compensate the standard errors only for heteroskedasticity (i.e. use White heteroskedasticity-robust standard errors)??
Direct/using a workaround/program something myself?

I just don't fully get it, if the VAR is basically built up from 3 lagged OLS regressions (where you can correct for HAC) why this should be in no way possible when estimating as a VAR..

Many thanks for your help!

Because the code that estimates a VAR is completely separate from the code that estimates OLS.

I have a similar problem. I intended to estimate it as a system (thus with OLS), but the HAC options are greyed out and not available. Why?

Because EViews doesn't offer HAC standard errors on systems estimated by OLS.

But you can specify a GMM model that is equivalent to the OLS specification (use all of the regressors as instruments and use TSLS weighting), and obtain the robust standard errors that way.

If using EViews 8--is there any way to run a VAR utilising the Newey-West errror correction for autocorrelation and heteroskedasticity? Or must we run each equation via OLS , adjusting for HAC-Newey West?

Nothing has changed in EViews 8.

And you can still specify as a system, though the HAC options are less numerous than those for the individual equations.

So what is the possible solution in case of VAR having autocorrelation and heteroscedasticity problem ???

To expand on our earlier comments, you can still create a system object from of the VAR, estimate using GMM with the appropriate set of instruments, and then tell EViews to do a full system HAC. No individual equations required.