# avg.pair.cc: Average Pairwise Cross-Sectional Correlations In BGVAR: Bayesian Global Vector Autoregressions

 avg.pair.cc R Documentation

## Average Pairwise Cross-Sectional Correlations

### Description

Computes average pairwise cross-sectional correlations of the data and the country models' residuals.

### Usage

```avg.pair.cc(object, digits=3)
```

### Arguments

 `object` Either an object of class `bgvar` or residuals of class `bgvar.res`. `digits` Number of digits that should be used to print output to the console.

### Details

If used for analyzing the country models' residuals, `avg.pair.cc` computes for each country and a given variable, the average cross-sectional correlation (either for the data or for the residuals). In theory, including foreign variables should soak up cross-sectional residual dependence and correlation of the residuals should be small. Otherwise dynamic analysis, especially using GIRFs, might lead to invalid results. See Dees et al. (2007) for more details.

### Value

Returns a list with the following elements

 `data.cor` is a matrix containing in the rows the cross-sections and in the columns the cross-sectional pairwise correlations of the data per variable. `resid.cor` is a matrix containing in the rows the cross-sections and in the columns the cross-sectional pairwise correlations of the country models' residuals per variable. `resid.corG` is a matrix containing in the rows the cross-sections and in the columns the cross-sectional pairwise correlations of the global models' residuals per variable. Only available when `avg.pair.cc` has been applied to a `bgvar.res` object from `residuals`. `data.res` is a summary object showing the number and percentage of correlations <0.1, between 0.1-0.2, 0.2-0.5 and <0.5 per variable of the data. `res.res` is a summary object showing the number and percentage of correlations <0.1, between 0.1-0.2, 0.2-0.5 and <0.5 per variable of the country models' residuals. This is also what is used by `print.bgvar`. `res.resG` is a summary object showing the number and percentage of correlations <0.1, between 0.1-0.2, 0.2-0.5 and <0.5 per variable of the global models' residuals. Only available when `avg.pair.cc` has been applied to a `bgvar. res` object from `residuals`.

### Author(s)

Martin Feldkircher

### References

Dees, S., Di Mauro F., Pesaran, M. H. and Smith, L. V. (2007) Exploring the international linkages of the euro area: A global VAR analysis. Journal of Applied Econometrics, Vol. 22, pp. 1-38.

`bgvar` for estimation of a `bgvar` object. `residuals` for calculating the residuals from a `bgvar` object and creating a `bgvar.res` object.

### Examples

```
library(BGVAR)
data(testdata)
model.mn <- bgvar(Data=testdata,W=W.test,plag=1,SV=TRUE,
draws=100,burnin=100,prior="MN")
avg.pair.cc(model.mn)

res <- residuals(model.mn)
avg.pair.cc(res)

```

BGVAR documentation built on Sept. 3, 2022, 1:06 a.m.