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I have a VAR model to forecast key economic variables like gdp and inflation, but I want to be able to do some sort of simulation to study a particular scenario.

I am running inflation expectations endogenously within the VAR, and now I want to create a counterfactual scenario where inflation expectations change to see the effect on the forecasts for the key economic variables.

I am not completely sure how I can go about the counterfactual scenario in the easiest way possible. Any suggestions on this?

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  • $\begingroup$ What software are you using? Scenarios are fairly simple in eviews. $\endgroup$
    – Jamzy
    Commented Oct 31, 2022 at 2:47
  • $\begingroup$ @Jamzy using R studio $\endgroup$
    – eddie
    Commented Oct 31, 2022 at 3:21

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