From general State-Space to VARMAX models

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Facultad de CC Económicas y Empresariales. Instituto Complutense de Análisis Económico
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Fixed coecients State-Space and VARMAX models are equivalent, meaning that they are able to represent the same linear dynamics, being indistinguishable in terms of overall fit. However, each representation can be specically adequate for certain uses, so it is relevant to be able to choose between them. To this end, we propose two algorithms to go from general State-Space models to VARMAX forms. The rst one computes the coecients of a standard VARMAX model under some assumptions while the second, which is more general, returns the coecients of a VARMAX echelon. These procedures supplement the results already available in the literature allowing one to obtain the State-Space model matrices corresponding to any VARMAX. The paper also discusses some applications of these procedures by solving several theoretical and practical problems.
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