[R] VAR with contemporaneous effects

Pfaff, Bernhard Dr. Bernhard_Pfaff at fra.invesco.com
Fri Mar 12 09:42:15 CET 2010

Dear Mitch,

have you taken a look at ?SVAR in package (vars), though the inclusion of exogenous variables is currently not supported.
In principle, your model form is a simultaneous interdependent multiple equation model. For estimating these kind of models have a look at the package systemfit and/or you can estimate your reaction functions by OLS, collect these with -- if applicable -- identities and solve this model on a per period basis by applying for instance the Gauß-Seidel algorithm.
As an aside, one can cast these type models with the Fair-Parke program and call FP from R with system(). This last option is probably more appropriate for larger macroeconomic models. For more information see:



 |>  -----Original Message-----
 |>  From: r-help-bounces at r-project.org 
 |>  [mailto:r-help-bounces at r-project.org] On Behalf Of Downey, Patrick
 |>  Sent: Friday, March 12, 2010 12:53 AM
 |>  To: r-help at r-project.org
 |>  Subject: [R] VAR with contemporaneous effects
 |>  Hi,
 |>  I would like to estimate a VAR of the form:
 |>  Ay_t = By_t-1 + Cy_t-2 + ... + Dx_t + e_t
 |>  Where A is a non-diagonal matrix of coefficients, B and C 
 |>  are matricies of
 |>  coefficients and D is a matrix of coefficients for the 
 |>  exogenous variables.
 |>  I don't think the package {vars} can do this because I 
 |>  want to include
 |>  contemporaneous cross-variable impacts. 
 |>  So I want y1_t to affect y2_t and I think in {vars} I can 
 |>  only have y1_t-1
 |>  affect y2_t. 
 |>  {vars} will only allow VARs of the form:
 |>  y_t = By_t-1 + Cy_t-2 + ... + Dx_t + e_t
 |>  Solutions? Maybe another package? Or maybe I'm thinking 
 |>  about this wrong?
 |>  (And I know that I have to put constraints on A to get 
 |>  identification - I'm
 |>  willing to do that).
 |>  Thanks,
 |>  Mitch Downey
 |>  ______________________________________________
 |>  R-help at r-project.org mailing list
 |>  https://stat.ethz.ch/mailman/listinfo/r-help
 |>  PLEASE do read the posting guide 
 |>  http://www.R-project.org/posting-guide.html
 |>  and provide commented, minimal, self-contained, reproducible code.
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