I am trying to use VAR for an undergraduate class but keep having degrees-of-freedom issues. I am using quarterly data, have 3o years of data, and have 10 time series.
I want to look at the effects of monetary policy shocks. But we learned that this method produces a price puzzle and that one way to fix the price puzzle is to include commodities prices.
My problem is that this seems like it treats a symptom and not a problem. I thought it might be a better idea to include a broad set of variables instead of just that one. It is justifiable to include lots of information but not justifiable to cherry-pick information, I think.
Anyone know how to include more variables in that set?