Panel Vector Autoregression in R with the Package Panelvar

49 Pages Posted: 19 Jan 2018 Last revised: 21 Feb 2019

See all articles by Michael Sigmund

Michael Sigmund

Oesterreichische Nationalbank (OeNB)

Robert Ferstl

Oesterreichische Nationalbank (OeNB)

Date Written: February 18, 2019

Abstract

In this paper, we extend two general methods of moment (GMM) estimators to panel vector autoregression models (PVAR) with p lags of endogenous variables, predetermined and strictly exogenous variables. We first extend the first difference GMM estimator to this extended PVAR model. Second, we do the same for the system GMM estimator. We implement these estimators in the R package panelvar. In addition to the GMM estimators, we contribute to the empirical literature by implementing common specification tests (Hansen overidentification test, lag selection criterion and stability test of the PVAR polynomial) and classical structural analysis for PVAR models such as orthogonal and generalized impulse response functions, bootstrapped confidence intervals for impulse response analysis and forecast error variance decompositions. Finally, we implement the first difference and the forward orthogonal transformation to remove the fixed effects.

Keywords: Panel vector autoregression model, generalized method of moments, first difference and system GMM

JEL Classification: G20, G30

Suggested Citation

Sigmund, Michael and Ferstl, Robert, Panel Vector Autoregression in R with the Package Panelvar (February 18, 2019). Quarterly Review of Economics and Finance, 2019. Available at SSRN: https://ssrn.com/abstract=2896087 or http://dx.doi.org/10.2139/ssrn.2896087

Michael Sigmund (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Robert Ferstl

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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