ECONOMETRIC METHODS II TA session 1 MATLAB Intro ...

ECONOMETRIC METHODS II TA Session 1
end
end
Figure 3.3: Impulse responses
3.3 Forecast Error Variance Decomposition (FEVD)
Once we have computed the Impulse Responses, we can now proceed to compute the
contribution of each variable to the Forecast Error variance j = 1; : : : ; h periods ahead.
We …rst compute the numerator and denominator of equation (2:8) separately, i.e. the
absolute contribution and the Mean-Squared-Error (MSE).
MSE=zeros(K,h);
CONTR=zeros(K,K,h);
for j=1:h
% Compute MSE
temp2=eye(K);
for i=1:K
if j==1
Fernando Pérez Forero 10