Macroeconomic Modeling with Asymmetric Vector Autoregressions
John W. Keating
University of Kansas
e-mail: jkeating@falcon.cc.ukans.edu

Abstract: VARs typically employ the same number of lags for each variable. Consequently, they often estimate many insignificant coefficients. The "asymmetric VAR" (AVAR), defined as a VAR for which each variable may have a unique number of lags, is shown to be the reduced form for a general linear structure. A particular economic structure is developed to compare and contrast parameter estimates from AVAR and VAR specifications. Qualitatively similar results are obtained from each model. The AVARs have standard errors that are frequently smaller than the VAR, suggesting AVARs may obtain more efficient parameter estimates. Important questions about macroeconomic structure are addressed with these models.