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SOLVED: Explain the use of vector autoregressions What advantages do vector autoregressions have over univariate time series models? [10 Marks]Consider the bivariate VAR model Yit = € O1lit-1 O12l2t-1 1t Yzt = € Q21lit-1 022l2 -1 62t " where E(e1 ez) = 0, all and t while Ele4 eis) 0,8 = t = G2,8 t,i =1.2. Assuming this is a reduced form representation; explain the main problem with the primitive structural) model. [10 Marks] Under what condition is the system weakly stationary? [10
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