This chapter demonstrates how to use XploRe for specifying, estimating, and interpreting vector autoregressive (VAR) models. VAR modeling belongs to multiple time series analysis. It is one approach in econometrics to describe a system of more than one equation and was introduced by Sims (1980). The classical multi equation modeling (e.g. Dhrymes; 1978) is not considered here.
Using the XploRe quantlib multi we will build a model for aggregate money demand. The first section shows how to prepare data and how to start the interactive menu part of the quantlib. The second section explains what could be done in a preliminary analysis. The specification, estimation, and validation of a full VAR model is carried out in the third section. Finally, model interpretation is left for the last section.
For a detailed monograph on multiple time series analysis see Lütkepohl (1993). The quantlib multi is based on a software of Haase et al. (1992).