Please answer with explanation so i understand what you've done.
Please Answer With Explanation So I Understand What You Ve Done 1 (58.39 KiB) Viewed 19 times
3) Consider the following miniature VAR(2) macroeconomic model, where my is money growth, y, is output growth and is inflation, taking the form: 774-1 111 = 1.7.10 2 +0.4.1 2 .9 0.8 774-2 Yt-2 + U21 yt m .2 0 0 0 .1.1 0 0 0 Yt-1 + (3) m-1 -2 1131 C-HEPONS ---- (1982) X C + A1X-1 + A2X-2 +U and U: MN .25 .05 .05.1 0.81 (a) Put the system into companion form and determine if the system is stationary/stable or not. (b) Find the variance of X: (r(0)) and the (unconditional) mean vector of Xt. (c) Use a Cholesky decomposition to factor Var(U) into PP' form, where P is a lower triangular matrix. Then compute and plot the first 20 impulse responses of 74, Y and m: to each of the three shocks uit, Vi = 1,2,3. (d) Forecast yt (output growth) 1 to 20 periods into the future. Assume that: TIT 5 yr = XT = X1-1 = 10 тт 回 (4) 15 to be able to generate the forecasts. Plot the forecasts of y: and comment on what you observe.
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X C + A1X-1 + A2X-2 +U and U: MN .25 .05 .05.1 0.81 (a) Put the system into companion form and determine if the system is stationary/stable or not. (b) Find the variance of X: (r(0)) and the (unconditional) mean vector of Xt. (c) Use a Cholesky decomposition to factor Var(U) into PP' form, where P is a lower triangular matrix. Then compute and plot the first 20 impulse responses of 74, Y and m: to each of the three shocks uit, Vi = 1,2,3. (d) Forecast yt (output growth) 1 to 20 periods into the future. Assume that: TIT 5 yr = XT = X1-1 = 10 тт 回 (4) 15 to be able to generate the forecasts. Plot the forecasts of y: and comment on what you observe.