smart_covmat function

Create random VAR model $(dxd)$ error term covariance matrix $\Omega$

fairly close to the given positive definite covariance matrix using (scaled) Wishart distribution

smart_covmat generates random VAR model $(dxd)$ error term covariance matrix $\Omega$

from (scaled) Wishart distribution that is fairly close to the given matrix.

smart_covmat(d, Omega, accuracy)

Arguments

• Omega: a symmetric positive definite $(dxd)$ covariance matrix specifying expected value of the matrix to be generated.

• accuracy: a positive real number adjusting how close to the given covariance matrix the returned individual should be.

  The standard deviation of each diagonal element is...

  • $\omega_{i,i}/$accuracy when accuracy \> d/2
  • and sqrt(2/d)*$\omega_{i,i}$ when accuracy \<= d/2.

  Wishart distribution is used for reduced form models, but for more details read the source code.

Returns

Returns a $(d(d+1)/2x1)$ vector containing vech-vectorized covariance matrix $\Omega$.