I have a set of covariance stationary variables which are slightly correlated to each other (<20%). I want to model the dependencies among the variables. I found out, that there are three types of VAR models:
- Reduced Form
Which one should I use? When I use the 'wrong' one, how can I detect it?
I'm currently using the reduced form VAR and the CoVar of the residuals shows minor correlation(<5%) among the residuals.