Matlab Codes for Approximating VAR Processes by Finite-State Markov Chains
The following list contains the key files associated with the Moment Matching Method in Gospodinov and Lkhagvasuren (2013), A Moment-Matching Method for Approximating VAR Processes by Finite-State Markov Chains, Journal of Applied Econometrics, 2014, Vol 29(5): 843–859.
- File var_Markov_MM.m is the main code of generating the grids and the transition matrix.
- File grids.mat is an 81-by-2 matrix containing the grids of (z, g) for N different states (9 grid points for each shock).
- File trans_matrix.mat is the 81-by-81 transition matrix associated with the 81 states. The column of the matrix corresponds to the current state and the rows are for the next state.
- File sampleshock.mat contains series of z and g shocks constructed by the method.