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From a VAR model to a structural model, with an application to the wage- price spiral. (English) Zbl 0713.62109

As the title suggests the authors present a model building strategy from general (vector autoregression) to specific (econometric structural model). Keeping in mind the famous criticism of C. A. Sims [Econometrica 48, 1-48 (1980)] against traditional model building, they propose running an unconstrained vector autoregression first and testing sequentially for non-causality, exogeneity, overidentifying restrictions, etc. These test procedures are based on asymptotic least squares and are easily implemented on standard software packages.
The advantage of this approach, as emphasized by the authors, is that in case of rejection of a given structural model, it is possible to identify the sources which are responsible for the rejection. A demonstration is given to the French wage-price sector. The model consists of eight variables and three equations. The several steps of the test procedure are discussed in detail. Proofs of two theorems stated in the main part of the paper are given in the appendix.
Reviewer: H.S.Buscher

MSC:

62P20 Applications of statistics to economics
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