Efficient VAR discretization

C-Tier
Journal: Economics Letters
Year: 2021
Volume: 204
Issue: C

Score contribution per author:

1.005 = (α=2.01 / 1 authors) × 0.5x C-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Tensor-grid discretization of VARs is inefficient. In particular, when there are just a few variables or the VAR components are correlated, this approach creates large inefficiencies because some discretized states will be visited with only vanishingly small probability. I show how to construct an efficient grid by either pruning these low-probability states or working directly with sparse grids. Efficient grids vastly improve accuracy for a given grid size, or, conversely, vastly reduce the number of states required to attain a given level of accuracy.

Technical Details

RePEc Handle
repec:eee:ecolet:v:204:y:2021:i:c:s016517652100149x
Journal Field
General
Author Count
1
Added to Database
2026-01-25