Lag length criteria, Macroeconomics

Assignment Help:

In order to estimate aVAR, alag length must be used in the estimation. There are many different criteria which can be used to signal the ideal lag length to use.Asteriou & Hall (2011) explain that the following three statistics are mainly used.

The first criterion which assesses the goodness of fit of the model is the Akaike Information criterion, (AIC), developed by Akaike (1974) and is written;

AIC=(RSS/n) e(2k/n)

The Schwarz Criterion (SC) developed by Schwarz (1978) with the following equation;

SC=(RSS/n) e(k/n)

The SCstatistic is likely to penalise complexity within models.
Finally, the Hannan and Quin criterion, (HQC);

HQC=(RSS/n) (ln?n)(2k/n)

The method of selecting the ideal lag length will be the lag number which minimises the statistics of each criterion. Should the tests produce conflicting results, then an explanation into which test that I will use will accompany the results.


Related Discussions:- Lag length criteria

Can growth arise without development, Can growth arise without development?...

Can growth arise without development? Growth is just one feature of development and therefore is an essential but not enough condition for economic development. For example, g

Monetary sector, If the reserve bank wants to pursue a contractionary polic...

If the reserve bank wants to pursue a contractionary policy, what should it do?

Explain the time constant of the circuit, A coil of inductance 0.04H and re...

A coil of inductance 0.04H and resistance 10Ω is linked to a 120V, d.c. supply. Determine (a) The ?nal value of current, (b) The time constant of the circuit, (c) The va

Natural resources are being rapidly depleted, Assume that there are only tw...

Assume that there are only two inputs (labor and natural resources) producing two goods (movies and gasoline) with no improvement in society's technology over time. Further, assume

Classical labour market, effects of real wage existing in the market that i...

effects of real wage existing in the market that is lower than the equlibrium real wage.what will happen in this labour market if it is perfectly competitive

Bonds are more attractive to investors, Briefly explain if you agree with t...

Briefly explain if you agree with the following statement: If interest rates rise, bonds become more attractive to investors, so bond prices rise. Therefore, when the interest rat

The government - rest of the world and the financial markets, The Governmen...

The Government, Rest of the World and the financial markets total expenditure of government can be divided into two parts: transfers to private sector and consumption.

Analitical approch, what is analitical approch to macroeconomics

what is analitical approch to macroeconomics

Ratios, How to find fixed costs for capacity ratio calculating from annual ...

How to find fixed costs for capacity ratio calculating from annual report?

Definition of money, Q. Definition of Money? Before talking over macroe...

Q. Definition of Money? Before talking over macroeconomic models we should define what we mean by money. Money has aninteresting and long history and an understanding of how we

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd