Lecture 7 Single Equation Models

Question 1

Intervention Models steps

Answer 1

(example of skyjacking metal detectors)

1. Use the longest data span to find a plausible set of ARIMA models ( you can use a Perron test for structural break)
2. Estimate the various models over the entire sample period including the effect of the intervention
3. Perform diagnostic check of the estimated equations.

…Problem for simple dummy approach: you have to guess the source.

Question 2

Typical Intervention Functions?

Answer 2

Panel Jump (persistent), Pulse (one time shift), gradually change, prolonged pulse (seems to decline)

Question 3

Simultaneous Equation models

SEMS)

Answer 3

Estimation of relations between different macroeconomic variables, deals with relations between aggregate quantities.

Structure implies a lot of restriction: AYt = B1Xt + B2 Yt-1 + B3 Xt-1
still not possible to construct theory consistent large scale macroeconometric models with transparent long runf properties & fit data
… lot of zeros