Which of the Following Are Characteristics of Vector Autoregressive (VAR)

question 17

Multiple Choice

Which of the following are characteristics of vector autoregressive (VAR) models?
(I) They are typically a-theoretical and data driven
(ii) they can easily lead to overfitting
(iii) all variables on the right hand side of the equation are pre-determined
(iv) their interpretation is often difficult from a theoretical perspective

• A) (i), (ii), (iii) and (iv)
• B) (i), (ii), and (iv) only
• C) (i) and (ii) only
• D) (i) and (iv) only For questions 2 and 3, consider the following set of simultaneous equations: Assume that the Y's are endogenous and the X's exogenous variables, and that the error terms are uncorrelated.