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lags in the VAR/INSTRUMENT function

Topics: VAR, SVAR, FAVAR
Jun 11, 2014 at 3:14 PM
Hi,
I was wondering is it possible use lags in the VAR/INSTRUMENT function? I tried to create instrument to a level SVAR model but resulted to an error message.

model = instrument(model,'dY := 'Y-Y{-1}');

Thanks
Mikko
Jun 11, 2014 at 4:46 PM
Hi Mikko

Yes, you should be able to use lags in instruments (up to the max lag included in the VAR). I'll look into the issue.

Best,
Jaromir
Marked as answer by jaromirbenes on 6/11/2014 at 8:46 AM
Jun 11, 2014 at 9:14 PM
Mikko

There is indeed a typo in the instrument function. I fix it in the next release. And just to correct my previous statement: you can include lags up the order of the VAR minus one -- e.g. if you have a second-order VAR, instruments can refer to variables t and t-1.

Best,
Jaromir
Marked as answer by jaromirbenes on 6/11/2014 at 1:14 PM
Jun 12, 2014 at 7:52 AM
Thank you Jaromir for the quick reply! The instrument function is a very nice additional feature to forecasting.

Best
Mikko
Jun 12, 2014 at 12:22 PM
Thanks. I fixed the function in yesterday's release. It should now work alright.

Best,
Jaromir
Marked as answer by jaromirbenes on 6/12/2014 at 5:30 AM