I am running a sign-restricted VAR in five variables with four identified shocks (leaving the fifth unidentified). I am interested in decomposing the first variable in contributions from the different structural shocks.
The historical shock decomposition output has contributions from the four shocks, initial conditions, and an unexplained part (due to not being identified). However, these do not add up to the original series that I am trying to explain.
Maybe I don't understand because I am relatively new to this, but any help would be appreciated!
Hi,
I am running a sign-restricted VAR in five variables with four identified shocks (leaving the fifth unidentified). I am interested in decomposing the first variable in contributions from the different structural shocks.
The historical shock decomposition output has contributions from the four shocks, initial conditions, and an unexplained part (due to not being identified). However, these do not add up to the original series that I am trying to explain.
Maybe I don't understand because I am relatively new to this, but any help would be appreciated!