Choleski decomposition - endogeneity

[kmoutsia]

Dear all,
I hope you are doing well.

I am trying to run panel VAR model with 3 variables: gdp (gdp), financial stability indicator (fin_stab), shadow economy indicator (shad_econ). Time period: 2006-2016, 35 countries.
My question is how to apply Choleski decomposition in order to classify variables from least to most endogenous (Stata commands).

I would appreciate your help.

Best regards,

Konstantinos

[John Mullahy]

Stata has a matrix function to do this; it would involve putting your data into a matrix and then computing the decomposition (see help mkmat and help cholesky). You can also do this in Mata: see help mata cholesky. I'm not sure I understand your application, but the mechanics of doing the decomposition are straightforward.