SSE/EFI Working Paper Series in Economics and Finance
Money Growth and Inflation: Implications of Reducing the Bias of VAR Estimates
Abstract: A bivariate second-order VAR model of money growth and
inflation is specified and estimatedby means of least squares. The bias of
the parameter estimates is approximated in three ways and new, bias-reduced
estimates are computed using the approximations. The effects of bias
reduction on impulse-response functions and variance decompositions are
found to be negligible. The effects of bias reduction on predictions, in
particular on predicted inflation, are more substantial.
Keywords: Vector autoregressive models; Bias reduction; impulse-response functions; variance decomposition; forecasts; (follow links to similar papers)
JEL-Codes: C32; C53; E37; (follow links to similar papers)
28 pages, November 1995
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