GVARResult#

class cultivars.multivariate.reduced_form.closed_global.GVARResult(*, endog, names, unit_names, unit_sizes, order, trend, coefficients, deterministic, contemporaneous, weights, sigma_u, resid, nobs, units)[source]

Bases: _SummaryMixin, _VectorPropagationMixin

A closed global system assembled from conditional units.

Each unit \(i\) was fitted on its own variables \(y_{it}\) with a weighted average of the other units’ variables, \(y^*_{it} = \sum_j w_{ij}\, y_{jt}\), entering as the exogenous block, so on its own it has no law of motion for the foreign variables it conditions on. Writing every unit in levels against the global vector \(x_t = (y_{1t}', \dots, y_{Nt}')'\) through its link matrix \(z_{it} = (y_{it}', y^{*\prime}_{it})' = W_i x_t\) and stacking,

\[G_0\, x_t = d_t + \sum_{l=1}^{p} G_l\, x_{t-l} + u_t, \qquad x_t = G_0^{-1} d_t + \sum_{l=1}^{p} G_0^{-1} G_l\, x_{t-l} + G_0^{-1} u_t,\]

where \(G_0\) stacks \([I, -\Lambda_{i0}] W_i\) and \(G_l\) stacks \([\Phi_{il}, \Lambda_{il}] W_i\). The inversion is the moment the system closes: individually no unit explains its foreign aggregate, jointly they all do, because one unit’s foreign variables are other units’ domestic ones. This record holds \(G_0\) as contemporaneous, the solved stack \(G_0^{-1} G_l\) as coefficients, and the rotated innovations \(G_0^{-1} u_t\) as resid.

Deliberately not a _VectorResult. Every other result in the package was estimated: it has one design matrix, one likelihood, one parameter count. This one was assembled – the units were estimated separately and then linked by an algebraic solve – so it has none of those three, and giving it hollow versions to fit the hierarchy would be worse than standing outside it. What it does have is a law of motion for every variable, which is why it carries the propagation surface the units individually refused and satisfies the closed-system contract they could not.

Note

The assembly is exact rather than approximate: substituting each unit’s link matrix into its own equations and stacking gives a square system whose solution reproduces every unit equation to machine precision, so contemporaneous @ resid.T is the stacked unit residuals and no unit’s coefficients are altered. What the assembly cannot do is make the units’ coefficients correct. A unit’s foreign aggregate contains other units’ contemporaneous variables, which the global solve makes functions of that unit’s own innovations, so least squares on a unit equation is consistent only if the aggregate is weakly exogenous for it. That is an assumption about the data, not a property of the estimator, and the bias it causes does not shrink as units are added. weak_exogeneity_test() is therefore not an optional diagnostic here – it is the condition under which everything else on this object means what it says, and the summary names any unit that fails it. Two further conventions: the global order is the deepest lag any unit uses in its levels form, with shorter units padded by zero blocks, and trend is read off the widest deterministic block among the units.

Variables:

  • endog – The global panel, all units side by side.

  • names – Global variable labels, "unit.variable".

  • unit_names – Unit labels, in global column order.

  • unit_sizes – Variables each unit contributes.

  • order – Lags of the global system.

  • trend – Deterministic specification of the global representation.

  • coefficients – (p, k, k) global autoregressive matrices.

  • deterministic – (d, k) global deterministic coefficients.

  • contemporaneous – The (k, k) linkage matrix inverted to close the system.

  • weights – The validated cross-unit weight matrix.

  • sigma_u – Covariance of the global reduced-form innovations.

  • resid – The global reduced-form innovations on the common sample.

  • nobs – Rows of the common sample.

  • units – The fitted unit results, in global column order.

See also

  • GVAR – the assembler that builds this record from fitted units and a weight matrix through solve().

  • VECMXResult – the conditional error-correction unit, the only kind whose weak-exogeneity assumption can be tested here.

  • VARXResult – the conditional levels unit, linked through the levels form it already is.

  • VARResult – the estimated closed system this record stands beside without descending from.

References

Pesaran, M. H., Schuermann, T., & Weiner, S. M. (2004). Modeling regional interdependencies using a global error-correcting macroeconometric model. Journal of Business & Economic Statistics, 22(2), 129-162.

Dees, S., di Mauro, F., Pesaran, M. H., & Smith, L. V. (2007). Exploring the international linkages of the euro area: A global VAR analysis. Journal of Applied Econometrics, 22(1), 1-38.

Chudik, A., & Pesaran, M. H. (2016). Theory and practice of GVAR modelling. Journal of Economic Surveys, 30(1), 165-197.

Example

A dominant unit and a satellite: the world price is a random walk, the satellite price error-corrects toward it. Each unit is fitted as a conditional error-correction model against the other, the weight matrix swaps them, and the solve closes the pair. The rotation back through the linkage matrix recovers the unit residuals exactly, and the generalized response of the satellite to a world shock climbs toward one as the gap closes:

>>> import numpy as np
>>> from cultivars.multivariate.reduced_form.error_correction import VECMX
>>> rng = np.random.default_rng(0)
>>> world, sat = np.zeros(400), np.zeros(400)
>>> for t in range(1, 400):
...     world[t] = world[t - 1] + rng.standard_normal()
...     gap = world[t - 1] - sat[t - 1]
...     sat[t] = sat[t - 1] + 0.3 * gap + 0.5 * rng.standard_normal()
>>> units = [
...     VECMX(world[:, None], sat[:, None], order=1, rank=1).fit(),
...     VECMX(sat[:, None], world[:, None], order=1, rank=1).fit(),
... ]
>>> swap = np.array([[0.0, 1.0], [1.0, 0.0]])
>>> names = ("world", "sat")
>>> res = GVAR(units, swap, variable_labels=["p", "p"], unit_names=names).solve()
>>> res.names, res.order, res.nobs
(('world.p', 'sat.p'), 1, 399)
>>> stacked = np.hstack([unit.resid[-res.nobs :] for unit in res.units])
>>> bool(np.allclose(res.contemporaneous @ res.resid.T, stacked.T))
True
>>> response = res.generalized_irf(8)[:, 1, 0]
>>> bool(response[1] > 0.25), bool(response[-1] > 0.9)
(True, True)
>>> res.exogeneity_table().metadata[2]
('Rejections', '1')

Private methods#

_comparison_label()

Short specification label.

_summary_table()

Build the structured summary.

_unit_index(unit)

Position of a unit, or a failure naming the ones that exist.
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