Panel vector autoregression in R with the package panelvar

In this paper we extend two general methods of moment (GMM) estimators to panel vector autoregression models (PVAR) with p lags of endogenous variables, predetermined and strictly exogenous variables. We first extend the first difference GMM estimator to this extended PVAR model. Second, we do the s...

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Bibliographic Details
Published in:The Quarterly review of economics and finance 2021-05, Vol.80, p.693-720
Main Authors: Sigmund, Michael, Ferstl, Robert
Format: Article
Language:English
Subjects:
First difference and system GMM
Generalized method of moments
Panel vector autoregression model
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Summary:In this paper we extend two general methods of moment (GMM) estimators to panel vector autoregression models (PVAR) with p lags of endogenous variables, predetermined and strictly exogenous variables. We first extend the first difference GMM estimator to this extended PVAR model. Second, we do the same for the system GMM estimator. We implement these estimators in the R package panelvar. In addition to the GMM estimators, we contribute to the empirical literature by implementing common specification tests (Hansen overidentification test, lag selection criterion and stability test of the PVAR polynomial) and classical structural analysis for PVAR models such as orthogonal and generalized impulse response functions, bootstrapped confidence intervals for impulse response analysis and forecast error variance decompositions. Finally, we implement the first difference and the forward orthogonal transformation to remove the fixed effects.
ISSN:1062-9769
1878-4259
DOI:10.1016/j.qref.2019.01.001