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Endogenous contemporaneous regressors

Topics: Models
Jun 1, 2015 at 3:09 PM
Hello folks, I have a question about how IRIS handles endogenous regressors that are contemporaneous to other transition variable/s. An example model:

X1_t = beta1 * X1_t-1 + beta2 * X2_t + e1_t

X2_t = e2_t

Y1_t = X1_t;

Y2_t = X2_t;

When using the 'sspace' function to extract the original system, the transition matrix is the following:
T = [  .1       0      .05;
        0       0       0;
        1       0       0]
According to this transition matrix X1 does not depend on X2. How does IRIS handles these kinds of relationships? I don't seem to understand how the system matrices are connecting these variables.

Thank you!
Jun 2, 2015 at 2:14 PM
Please disregard the question. I noticed that matrix R is in charge of the loadings on contemporaneous shocks. Thanks!