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Structural VAR, MARMA and Open Economy Models

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Structural VAR, MARMA and Open Economy Models

Phoebus J. Dhrymes & Dimitrios D. Thomakos

International Journal of Forecasting
Volume 14, Issue 2, 1 June 1998, Pages 187–198

Abstract. In this paper we examine a number of issues in the context of structural VAR and MARMA open economy macro models. In particular, we examine whether VAR or MARMA is the more appropriate specification; whether expectations are forward or backward looking, and whether a number of restrictions imposed on such models are supported by empirical evidence. Prior restrictions are imposed by means of Lagrange multipliers, which makes many of the tests noted above routine.

Keywords. Structural VAR, Structural MARMA, Open economy macro, Rational expectations, Just- and over-identification, Lagrange multipliers

DOI. 10.1016/S0169-2070(98)00026-0

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