Structural VAR

A Structural Vector Autoregression (SVAR) is an econometric model used to analyze how multiple interconnected economic variables influence each other over time. It captures the dynamic relationships among variables—such as inflation, interest rates, and employment—by considering their past values (lags). Unlike simpler models, SVAR incorporates theoretical assumptions to identify the cause-and-effect relationships, helping economists understand how shocks or changes in one variable affect others. This makes SVAR a valuable tool for analyzing economic policies and predicting future economic trends based on current data.