🌍 Week 11 Homework — Feedback

Student: Felice Urciuoli Assignment: VAR Estimation and Identification

✅ Overall Assessment

Result: ✅ Pass

Strong submission with correct implementation. The student correctly estimated the VAR, identified the structural shocks using Cholesky decomposition, and produced the required IRFs. The code is well-structured and includes a clear economic interpretation of the results, correctly identifying the “price puzzle”.

🔍 Task-by-Task Check

Task Description Status Notes
1.1 Data Loading & Cleanup ✅ Correctly loads US_macro_data.csv and handles dates
1.2 Data Transformation ✅ Correctly computes annualized growth rates (400 * diff log)
1.3 Construct Data Matrices ✅ Correct setup of LHS and RHS matrices
1.4 OLS Estimation ✅ Correct VAR estimation using OLS
1.5 Extract A1 Matrix ✅ Correct extraction of dynamic coefficients
1.6 Residuals & Sigma ✅ Correct calculation of residuals and covariance matrix
1.7 Identification (Cholesky) ✅ Correct use of chol(Sigma, 'lower')
1.8 Compute IRFs ✅ Correct iterative computation of IRFs
1.9 Plot IRFs ✅ Generates clear plots for the monetary policy shock
1.10 Save Figures ✅ Uses saveas to save output

📈 Technical Implementation

  • VAR Estimation: Correctly implements the OLS estimator for the VAR system.
  • Identification: Correctly applies the Cholesky decomposition with the specified ordering (GDP -> Inflation -> Rates).
  • IRF Generation: The loop for generating IRFs is logically correct.
  • Code Structure: The code is clean and easy to follow.

💬 Style & Clarity

  • Comments: Excellent comments explaining each step of the process.
  • Variable Naming: Clear variable names (Y_lhs3, X_rhs3, B3).
  • Interpretation: Includes a detailed comment explaining the “price puzzle” anomaly found in the results.

📊 Visual Output Assessment

  • Plots: Clear and correctly labeled subplots for the IRFs.
  • Titles: Descriptive titles for each subplot.

✅ Suggestions for Improvement

  1. Generalization: The code is specific to the 3-variable case. Using loops for plotting could make it more adaptable to larger systems.

🎯 Summary

Excellent work. The submission meets all requirements and demonstrates a solid understanding of VARs and structural identification. The inclusion of the economic interpretation is a nice touch.

Grade Level: ✅ Pass (10/10 tasks correct)