Feb 29, 2016 at 4:59 AM
Edited Feb 29, 2016 at 4:59 AM

Hi Jeromir,
I am trying to do a SVAR model with short run restrictions using IRIS tool box. My model has foreign interest rate (i*), gdp(y), Inf (p), domestic interest rate (i) and real exchange rate (q) in the given order.
Deviating from the normal cholesky decomposition, I wish to have simultaneous contemporaneous effects between domestic interest rate (i) and real exchange rate (q) so there will be one nonzero element in the upper triangle. In order to get the minimum number
of restrictions, I will assume domestic interest rate only respond to y, p and q and not for i* contemporaneously. Could you explain how I could achieve this identification.
Should I be using 'householder' as the method and test a string that specify this particular identification?
e.g. [s,sd,B,COUNT] = SVAR(v,vd,'method=', 'householder','test =', test_string);
And how should I specify the string to impose zero restrictions? I tried something like
test_string = ['S(1,2,1)== 0',......] but the program just crash.
I would really appreciate if you could give some advice on this.
Thanking you in advance.



I would also be interested in this question.
How can I impose my arbitrary (not sign and not Cholesky zero) restrictions on the contemporaneous matrix?
Thanks!



Relating to the above: is it possible to impose less restrictions in the contemporaneous matrix than what is needed for full identification? When I am only interested in identifying one particular shock and do not care about the rest, then maybe it is
better to avoid making more restrictions by a full Cholesky (lower triangular matrix). Can this be done? This relates to the above question whether we can set the restrictions by hand.
Thanks!

