Vector Autoregression - Applications

Applications

VAR models were advocated by Christopher Sims, who criticized the claims and performance of earlier modeling in macroeconomic econometrics. He recommended VAR models, which had previously appeared in time series statistics and in system identification, a statistical specialty in control theory. Sims advocated VAR models as providing a theory-free method to estimate economic relationships, thus being an alternative to the "incredible identification restrictions" in structural models.