VARs with Linear Restrictions

The basic k -variable VAR(p) specification has k(pk+d) coefficients so that even moderate sized VARs require estimation of a large number of parameters. When VARs are applied to macroeconomic data with limited sample sizes, model over-parameterization is a frequent problem as there are too few observations to estimate precisely the VAR parameters.


EViews now offers support for the linear restriction approach to handling this over-parameterization problem.



VAR Linear Restrictions