FEVD function

Forecast error variance decomposition

This function computes the orthogonalized/generalized forecast error variance decomposition

FEVD(
  Phi,
  Sigma,
  nfore = 100,
  type = c("time", "frequency"),
  generalized = TRUE,
  range = NULL
)

Arguments

• Phi: VAR coefficient matrix
• Sigma: Residual variance-covariance matrix
• nfore: H-step ahead forecast horizon
• type: Time or Frequency connectedness approach
• generalized: Generalized or orthogonalized FEVD
• range: Partition range for frequency approach only.

Returns

Orthogonalized/generalized time/frequency forecast error variance decomposition

Examples

data("dy2012")
fit = VAR(dy2012, configuration=list(nlag=1))
fevd = FEVD(Phi=fit$B, Sigma=fit$Q, nfore=10, type="time", generalized=TRUE)$FEVD

References

Stiassny, A. (1996). A spectral decomposition for structural VAR models. Empirical Economics, 21(4), 535-555.

Koop, G., Pesaran, M. H., & Potter, S. M. (1996). Impulse response analysis in nonlinear multivariate models. Journal of Econometrics, 74(1), 119-147.

Pesaran, H. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics Letters, 58(1), 17-29.