Vector Autoregression Quiz

Answers and explanations appear as you take the quiz.

1. In a VAR(p), what predictors appear in each equation?
   • Lagged values of every included endogenous variable
   • Only current values of other variables, with no lags
   • Only each variable’s own lagged values, excluding cross-series lags
   • Only exogenous predictors, with no lagged endogenous terms
2. In a VAR(2) with three variables, how many lag coefficients appear in each equation before intercepts?
   • 3
   • 6
   • 2
   • 9
3. What does a Granger-causality finding support?
   • The variables are contemporaneously independent
   • An intervention has a proven causal effect
   • Lagged values add predictive information conditional on the model
   • The model has no omitted variables
4. Why assess cointegration before differencing several nonstationary series?
   • A standard VAR requires all variables to be independent
   • Cointegration forces every VAR coefficient to zero
   • Differencing creates a seasonal period
   • Differencing may remove a meaningful long-run equilibrium relation
5. Why can a high-dimensional VAR overfit a short series?
   • Lagged predictors use no parameters
   • Each added variable and lag adds many coefficients
   • The residuals become deterministic
   • The model estimates only one mean
6. What does residual autocorrelation after fitting suggest?
   • The variables are cointegrated
   • All lag terms are causal
   • Some temporal dependence may remain unexplained
   • The series is guaranteed nonstationary
7. What assumptions affect structural impulse-response interpretations?
   • A zero-valued mean for all observations
   • Only the reported lag order
   • The alphabetical order of series names
   • Identification restrictions on correlated system shocks
8. Which model may be considered for cointegrated nonstationary variables?
   • A vector error-correction model
   • A standard stationary VAR without checking
   • A k-means clustering model
   • A univariate moving average of residuals only