These are questions designed to familiarize you with the use of Vector Autoregressions. To answer the questions, first download the zip file containing the MATLAB code you will need to run (the code works for me on MATLAB 6.5). Then, extract the contents of the zip file to a subdirectory on your computer. Type ‘assignment1’ at the MATLAB command line. The code will then automatically execute the calculations required to answer the first question. To answer the other questions, change the parameters at the start of the MATLAB program, assignment.m. The questions ask you to work with the VAR analyzed in Altig, Christiano, Eichenbaum and Linde (‘Firm-Specific Capital, Nominal Rigidities and the Business Cycle’).

The code is set up so that you can also replicate the results based on smaller VARs reported in Christiano, Eichenbaum and Vigfusson (‘What Happens After a Technology Shock?’). In addition, by changing the settings in the code, you can explore the robustness of the results in that paper.