Week 11 Homework Feedback: Alice Ciavatta

Overall Assessment

Grade: ✅ (Pass)

Correct submission. You implemented the VAR estimation and Cholesky identification correctly. Your code includes a clear manual implementation of the IRF iteration.

Task-by-Task Check

Data Preparation

  1. Transformations: ✅ Correct transformations.
  2. Alignment: ✅ Correctly handled lag alignment.

Estimation & Identification

  1. VAR Estimation: ✅ Correct OLS estimation.
  2. Covariance: ✅ Calculated Sigma_u correctly with degrees of freedom correction (though simple covariance is also fine).
  3. Cholesky: ✅ Correct lower triangular chol.
  4. Ordering: ✅ Correct ordering.

Impulse Response Functions

  1. Shock Selection: ✅ Correct selection of the 3rd shock.
  2. IRF Computation: ✅ Your manual implementation using Phi (powers of A) is mathematically correct and equivalent to the loop method.
  3. Plotting: ✅ Plots are clear.
  4. Interpretation: ✅ Good discussion of the “Price Puzzle”.

Technical Implementation

  • Code Structure: Well-structured.
  • IRF Method: Using $A^h$ (Phi = A * Phi) is a valid and elegant way to compute IRFs.

Suggestions for Improvement

  • None. The implementation is solid.

Summary

10/10 tasks correct. Correct work.