[R] VAR question

John C Frain frainj at gmail.com
Tue Aug 12 20:10:59 CEST 2008

I presume that your problem is  in quantitative macroeconomics and
that your sample size is limited.  Are your variables stationary.  If
not you may need to use a VECM or if there is no cointegration work in
first differences.

My choice of variables would in the first instance be determined by
economic theory and the number of lags by an information criterion or
by testing down from a general model.  You might use Granger Causality
tests to reduce the model if necessary.   Otherwise a lot depends on
the properties of your model.

For forecasting purposes a BVAR might be a better solution.

Best Regards

John Frain

2008/8/12 Zhang Yanwei - Princeton-MRAm <YZhang at munichreamerica.com>:
> Hi all,
> I got another VAR question here and really appreciate if somebody would help me out :)
> I have five time series, say A,B,C,D,E. My objective is to predict the series A using the rest, that is, B, C, D and E. A Vector Autoregression Model should work here. But first of all, I should select which series of B, C, D and E to be include in the VAR model, as well as the number of lags. I wonder If someone would give some advice on such a series selection procedure. Thanks so much.
> Sincerely,
> Yanwei Zhang
> Department of Actuarial Research and Modeling
> Munich Re America
> Tel: 609-275-2176
> Email: yzhang at munichreamerica.com<mailto:yzhang at munichreamerica.com>
>        [[alternative HTML version deleted]]
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John C Frain
Trinity College Dublin
Dublin 2
mailto:frainj at tcd.ie
mailto:frainj at gmail.com

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