Structural VAR Models

Structural Vector Autoregressive (SVAR) models are statistical tools used to analyze relationships among multiple variables over time. They help identify how shocks or changes in one variable, like interest rates or inflation, influence others, while accounting for the interconnected nature of economic factors. By imposing restrictions based on economic theory, SVAR models distinguish between correlation and causation, providing clearer insights into the underlying mechanisms driving observed data. This allows economists to better understand the dynamics of complex systems, forecast future developments, and evaluate policy impacts with greater clarity.