function [InnovationVariance,AutoregressiveParameters] = autoregressive_process_specification(Variance,Rho,p) % This function computes the parameters of an AR(p) process from the variance and the autocorrelation function % (the first p terms) of this process. % % INPUTS % [1] Variance [double] scalar, variance of the variable. % [2] Rho [double] p*1 vector, the autocorelation function: \rho(1), \rho(2), ..., \rho(p). % [3] p [double] scalar, the number of lags in the AR process. % % OUTPUTS % [1] InnovationVariance [double] scalar, the variance of the innovation. % [2] AutoregressiveParameters [double] p*1 vector of autoregressive parameters. % % NOTES % % The AR(p) model for {y_t} is: % % y_t = \phi_1 * y_{t-1} + \phi_2 * y_{t-2} + ... + \phi_p * y_{t-p} + e_t % % Let \gamma(0) and \rho(1), ..., \rho(2) be the variance and the autocorrelation function of {y_t}. This function % compute the variance of {e_t} and the \phi_i (i=1,...,p) from the variance and the autocorrelation function of {y_t}. % We know that: % % \gamma(0) = \phi_1 \gamma(1) + ... + \phi_p \gamma(p) + \sigma^2 % % where \sigma^2 is the variance of {e_t}. Equivalently we have: % % \sigma^2 = \gamma(0) (1-\rho(1)\phi_1 - ... - \rho(p)\phi_p) % % We also have for any integer h>0: % % \rho(h) = \phi_1 \rho(h-1) + ... + \phi_p \rho(h-p) % % We can write the equations for \rho(1), ..., \rho(p) using matrices. Let R be the p*p autocorelation % matrix and v be the p*1 vector gathering the first p terms of the autocorrelation function. We have: % % v = R*PHI % % where PHI is a p*1 vector with the autoregressive parameters of the AR(p) process. We can recover the autoregressive % parameters by inverting the autocorrelation matrix: PHI = inv(R)*v. % % This function first computes the vector PHI by inverting R and computes the variance of the innovation by evaluating % % \sigma^2 = \gamma(0)*(1-PHI'*v) % Copyright © 2009-2017 Dynare Team % % This file is part of Dynare. % % Dynare is free software: you can redistribute it and/or modify % it under the terms of the GNU General Public License as published by % the Free Software Foundation, either version 3 of the License, or % (at your option) any later version. % % Dynare is distributed in the hope that it will be useful, % but WITHOUT ANY WARRANTY; without even the implied warranty of % MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the % GNU General Public License for more details. % % You should have received a copy of the GNU General Public License % along with Dynare. If not, see . AutoregressiveParameters = NaN(p,1); InnovationVariance = NaN; switch p case 1 AutoregressiveParameters = Rho(1); case 2 tmp = (Rho(2)-1)/(Rho(1)*Rho(1)-1); AutoregressiveParameters(1) = Rho(1)*tmp; AutoregressiveParameters(2) = 1-tmp; case 3 t1 = 1/(Rho(2)-2*Rho(1)*Rho(1)+1); t2 = (1.5*Rho(1)-2*Rho(1)*Rho(1)*Rho(1)+.5*Rho(3))*t1; t3 = .5*(Rho(1)- Rho(3))/(Rho(2)-1); AutoregressiveParameters(1) = t2-t3-Rho(1); AutoregressiveParameters(2) = (Rho(2)*Rho(2)-Rho(3)*Rho(1)-Rho(1)*Rho(1)+Rho(2))*t1 ; AutoregressiveParameters(3) = t3-Rho(1)+t2; otherwise AutocorrelationMatrix = eye(p); for i=1:p-1 AutocorrelationMatrix = AutocorrelationMatrix + diag(Rho(i)*ones(p-i,1),i); AutocorrelationMatrix = AutocorrelationMatrix + diag(Rho(i)*ones(p-i,1),-i); end AutoregressiveParameters = AutocorrelationMatrix\Rho; end InnovationVariance = Variance * (1-AutoregressiveParameters'*Rho);