Materials introducing the theoretical backgrounds

Dear All,

I read the manual and professor Pfeifer’s papers which introduced how to implement “shock_decomposition”, “variance decomposition”, “conditional variance decomposition”, “identification” etc. in Dynare.

But I am unaware of the theoretical concepts of these tasks mentioned above, I have no idea what these commands are doing, what are they used for, and why we need them.

Is there any text book or paper introducing the theoretical backgrounds of all these issues?


These things are based on linear time series techniques in state space models. The first reference to come to mind would be Hamilton (1994): Time Series Analysis.