Building a Structural Panel VAR in IRIS

[Aqib Aslam]

Dear all,

 

Some information on how to generate structural impulse responses functions from a panel VAR within IRIS. With thanks to Jaromir Benes for his response. Posting original question and response for others to have access to.

 

Many thanks,

 

Aqib

 

--

 

Q: Does IRIS allow us to transform a panel VAR into a structural panel VAR in order to generate SIRFs? We have attempted to do so using the VAR/SVAR command, but the input data (by both group and variable) does not appear to be read correctly by the function. And therefore, we wanted to check whether this functionality exists within IRIS.

 

Response (courtesy of Jaromir Benes): You can use the following workaround:

The individual countries differ only in the constant terms capturing the fixed effect. This obviously means that the shock responses are identical. Therefore you can simply extract one particular country (group) from a panel VAR to create a new, plain VAR, and then compute the SVAR and shock responses on this plain VAR. Note that you don't even need the SVAR database (with transformed shocks) returned as the second output argument from the command SVAR.

In other words, do this. Create a new plain VAR based on one of the countries, say, Argentina

 

pv1 = group(pv,'Argentina');

 

and the identify a SVAR based on pv1

 

spv = SVAR(pv1,[ ],'method=','chol');

 

Note also that if you for instance need to look at the matrix B, you simply ask

 

B = get(spv,'B');

 

(You don't need to capture it as the third output argument from SVAR)