TY  - JOUR
AU  - Fernandez-Villaverde,Jesus
AU  - Rubio-Ramirez,Juan
AU  - Sargent,Thomas J.
TI  - A, B, C's (and D)'s for Understanding VARs
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 308
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/t0308
L1  - http://www.nber.org/papers/t0308.pdf
N1  - Author contact info:
Jesus Fernandez-Villaverde
University of Pennsylvania
160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
Tel: 267/307-1068
E-Mail: jesusfv@econ.upenn.edu

Juan Rubio-Ramírez
Duke University
P.O. Box 90097
Durham, NC 27708
Tel: 9196601865
E-Mail: juan.rubio-ramirez@duke.edu

Thomas J. Sargent
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 612/373-4383
Fax: 650/723-1687
E-Mail: thomas.sargent@nyu.edu
AB  - The dynamics of a linear (or linearized) dynamic stochastic economic model can be expressed in terms of matrices (A,B,C,D) that define a state space system. An associated state space system (A,K,C,Sigma) determines a vector autoregression for observables available to an econometrician. We review circumstances under which the impulse response of the VAR resembles the impulse response associated with the economic model. We give four examples that illustrate a simple condition for checking whether the mapping from VAR shocks to economic shocks is invertible. The condition applies when there are equal numbers of VAR and economic shocks.
ER  -