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Authors: | Craig F. Ansley |
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Affiliation: | Graduate School of Business, University of Chicago , Chicago , IL , 60637 |
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Abstract: | A vector autoregression is a reduced-form representation and therefore would be expected to change when any structural equation in the system changes, regardless of whether economic decisions are forward-looking. Even so, a dynamic simulation of a model with unit roots will exhibit large cumulative errors, making it difficult to detect whether a structural change has indeed occurred. |
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Keywords: | Common factor Common index Cross-correlation International business cycle Serial correlation |
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