I am wondering how I can do the variance decomposition for some variables are I(1). For example, I have a Gali (1999) type VAR with growth of TFP and the growth of hour, and I want to know the contribution of the identified technology shock to output or hour. It is straight forward to compute the variance decomposition for the differenced variables in the model, but I have no idea how to do it for the integrated variables.
Thanks in advance.
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variance decomposition for I(1) variables.
by bigbigben » Thu Jun 10, 2010 6:21 am
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