stylistic:tone, structural:reformatting, structural:expansion, quality:corruption
Definition

VAR models are characterized by their order, which refers to the number of earlier time periods the model will use. Continuing the above example, a 5th-order VAR would model each year's wheat price as a linear combination of the last five years of wheat prices. A lag is the value of a variable in a previous time period. So in general a p th-order VAR refers to a VAR model which includes lags for the last p time periods. A p th-order VAR is denoted "VAR(p)" and sometimes called "a VAR with p lags". A p th-order VAR model is written as