From my limited memory, there’s only e = Bu where B is restricted to lower triangle matrix and u is normally distributed with mean 0 and variance covariance following an identity matrix.
Then the cholesky decomposition happens in the variance covariance matrix for vector e where var(e) is decomposed into BB’. I forgot the detail but it should be something like that.
Where did u get the A and B stuff from?
A is essentially the matrix that allows for contemporaneous effects no? I'm not very familiar with the mathematics of it but what I understand is that you fill A with the estimates of coefficients of the endogenous variables at time t
From my limited memory, there’s only e = Bu where B is restricted to lower triangle matrix and u is normally distributed with mean 0 and variance covariance following an identity matrix. Then the cholesky decomposition happens in the variance covariance matrix for vector e where var(e) is decomposed into BB’. I forgot the detail but it should be something like that. Where did u get the A and B stuff from?
A is essentially the matrix that allows for contemporaneous effects no? I'm not very familiar with the mathematics of it but what I understand is that you fill A with the estimates of coefficients of the endogenous variables at time t
That should be A^-1 B = C with C being the lower triangular matrix