Model Reduction Methods for Vector Autoregressive Processes

1 Introduction.- 1.1 Objective of the Study.- 1.2 Outline of the Study.- 2 Model Reduction in VAR Models.- 2.1 The VAR Modeling Framework.- 2.2 Specification of Subset VAR Models.- 2.2.1 System Versus Single Equation Strategies.- 2.2.2 System Strategies.- 2.2.3 Single Equation Strategies for Subset Modeling.- 2.2.4 Multiple Search Paths Strategies.- 2.2.5 Summarizing Remarks.- 2.3 Monte Carlo Comparison.- 2.3.1 Evaluation of Subset Methods.- 2.3.2 The Monte Carlo Design.- 2.3.3 Monte Carlo Results.- 2.4 Summary.- 3 Model Reduction in Cointegrated VAR Models.- 3.1 The Cointegrated VAR Modeling Framework.- 3.2 Modeling Cointegrated VAR Processes.- 3.3 Data Based Model Reduction.- 3.3.1 Specification of Subset VECMs.- 3.3.2 Testing for Weak Exogeneity.- 3.4 Evaluation of Model Reduction Method.- 3.4.1 Monte Carlo Comparison of Subset Methods.- 3.4.2 Small Sample Properties of Weak Exogeneity Tests.- 3.5 Summary.- 3.A DOP Parameters and Properties.- 4 Model Reduction and Structural Analysis.- 4.1 The Structural VAR Modeling Framework.- 4.2 Estimation of Structural VAR Models.- 4.2.1 Estimation with Unrestricted Reduced Form Parameters.- 4.2.2 Estimation with Restricted Reduced Form Parameters.- 4.2.3 Estimation of Just-identified Models.- 4.2.4 Estimation at Work - An Illustrative Example.- 4.3 Monte Carlo Experiments.- 4.3.1 Model Reduction and the Properties of SVAR Estimates.- 4.3.2 Model Reduction and Impulse Response Point Estimates.- 4.3.3 Model Reduction and Interval Estimates of Impulse Responses.- 4.4 Summary.- 4.A Time Series Plots.- 4.B DGP Parameters.- 5 Empirical Applications.- 5.1 The Effects of Monetary Policy Shocks.- 5.1.1 Introduction.- 5.1.2 Identification of Monetary Policy Shocks.- 5.1.3 The Empirical Model Specification.- 5.1.4 Specifying Subset VAR Models.- 5.1.5 Impulse Response Analysis.- 5.1.6 Conclusion.- 5.2 Sources of German Unemployment.- 5.2.1 Introduction.- 5.2.2 Econometric Methodology.- 5.2.3 A Small Labor Market Model.- 5.2.4 Cointegration Analysis of the German Labor Market.- 5.2.5 Structural Analysis.- 5.2.6 Conclusion.- 5.3 Summary.- 5.A Data Sources.- 5.B Two Cointegrating Vectors.- 5.C VECM Estimates.- 6 Concluding Remarks and Outlook.- 6.1 Summary.- 6.2 Extensions.- Index of Notation.- List of Figures.- List of Tables.