CARIFORUM and UK EPA Study

P

¥ å

å

X AX U = +

iU

® F

1

t

i

t

t

i

t i -

-

(9)

1

0

i

i

=

=

1 1 i A A - F = F + F + 2 2 ... i - i

, 1,2,...; =

p i p A i - F

(10)

whereor PP’. X t then becomes:

1 i X AP P U ¥ - - = = å ( )( t i t

).

1

(11) The impulse response function (IRF) is thus conventionally written as a moving average (MA) representation: 0

0 ( ) j n j n Pe n y = F = ,

0,1, 2, 3,...;

(12)

where ej is an identity matrix. The generalized representation of the IRF is denoted as:

( , , d

)

( E X u |

,

) (

|

)

GIRF n =

E X

W

=

=

d

W -

W

. (13) Equation 13 is usually scaled in standard deviation units. Though strenuous arguments have been made to standardize the atheoretic form, the representations of the disturbances and their dissipations are not fundamental different. The uses of the impulse response functions are diverse, especially from a policy perspective—intricate fiscal and monetary policies (Bernanke and Blinder (1992) and Stock and Watson (2001); see also several working papers of the Bank of England and Warburton, 2012a. 1 1 1 X j t t n jt j t t n t - + - + -

APPENDIX IV - TECHNICAL/EMPIRICAL ANALYSIS

Part 1: Variable Description Variable description or definition alludes to the description and operationalization of the variables in this study. All descriptions, except otherwise stated, are based on the sources of information/data that have been utilized in this study. The description and operationalization apply to both the descriptive and empirical analyses of this section of the study.

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