1. Consider the following vector autoregressive model 1: Yr = Bo + 251 J'ti +11: i=1 where yr is a p-dimensional vector of variables determined by k lags of all 19 variables in the system, at is a vector of errors, 60 is a vector of constant term coefcients and 15', are matrices of coefcients on the ith lag of y. a) If p = 2 and k = 3 write all the equations of the VAR in full, carefully dening any new notation you use. [20 marks] b) Why have VARS become popular for application in nance, relative to structural models derived from some underlying theory? [10 marks] c) Explain any weaknesses you perceive in the VAR approach to econometric modelling. [10 marks]