Constructing structural VAR models with conditional independence graphs

  • Authors:

  • Les Oxley;Marco Reale;Granville Tunnicliffe Wilson

  • Affiliations:

  • Economics Department, University of Canterbury, Private Bag 4800, Christchurch, New Zealand;Mathematics and Statistics Department, University of Canterbury, Private Bag 4800, Christchurch, New Zealand;Mathematics and Statistics Department, University of Lancaster, Lancaster LA1 4YF, United Kingdom

  • Venue:
  • Mathematics and Computers in Simulation
  • Year:
  • 2009

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Abstract

In this paper graphical modelling is used to select a sparse structure for a multivariate time series model of New Zealand interest rates. In particular, we consider a recursive structural vector autoregressions that can subsequently be described parsimoniously by a directed acyclic graph, which could be given a causal interpretation. A comparison between competing models is then made by considering likelihood and economic theory.