A disadvantage of univariate time-series models and VARs is
A)they cannot be used easily to analyze the effects of monetary policy.
B)they are based on classical, rather than Keynesian, economic theory.
C)they provide poor forecasts.
D)they are not based on data.

Question

Quizplus · Accepted Answer

Univariate time-series models and Vector Autoregressions (VARs) often struggle to analyze the effects of monetary policy effectively because they do not explicitly incorporate information about policy changes or the channels through which policy affects the economy. These models primarily focus on capturing the statistical properties of the data rather than the underlying economic mechanisms.

A Disadvantage of Univariate Time-Series Models and VARs Is