I study the sources of US inflation since 2020 by estimating a VAR and using the identifying restriction that the price elasticity of the aggregate demand schedule is (minus) unity. Thus, aggregate demand determines nominal GDP growth and aggregate supply determines how it is split up between inflation and real GDP growth.
If e are the VAR residuals and u the structural residuals so that Ae = u. Then let A be a lower triangular matrix with 1 everywhere, leaving A(1,2) to be non-zero.
Could you share your analysis' code?
If e are the VAR residuals and u the structural residuals so that Ae = u. Then let A be a lower triangular matrix with 1 everywhere, leaving A(1,2) to be non-zero.
Thank you.