Inference for Impulse Responses
AbstractPoor identification of individual impulse response coefficients does not necessarily mean that an impulse response is imprecisely estimated. This paper introduces a three-pronged approach on how to communicate uncertainty of impulse response estimates: (1) withWald tests of joint significance; (2) with conditional t-tests of individual marginal coefficient significance; and (3) with fan charts based on the percentiles of the joint Wald statistics. The paper also shows how to anchor the impulse response analysis with a priori economic restrictions that can be formally tested and used to tighten structural identification. These methods are universal and do not depend on how the impulse responses are estimated. An empirical application illustrates the techniques in practice.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of California, Davis, Department of Economics in its series Working Papers with number 77.
Date of creation: 07 Jun 2007
Date of revision:
impulse response function; local projections; vector autoregressions;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blanchard, Olivier Jean & Quah, Danny, 1989.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
American Economic Review,
American Economic Association, vol. 79(4), pages 655-73, September.
- Tom Doan, . "BQDODRAWS: RATS procedure to implement Monte Carlo draws from a VAR with Blanchard-Quah factorization," Statistical Software Components RTS00030, Boston College Department of Economics.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Tom Doan, . "RATS programs to replicate Blanchard and Quah AER 1989," Statistical Software Components RTZ00017, Boston College Department of Economics.
- Olivier Jean Blanchard & Danny Quah, 1990. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
- Kuersteiner, Guido M., 2002. "Efficient Iv Estimation For Autoregressive Models With Conditional Heteroskedasticity," Econometric Theory, Cambridge University Press, vol. 18(03), pages 547-583, June.
- Lutz Kilian, 1999. "Finite-Sample Properties of Percentile and Percentile-t Bootstrap Confidence Intervals for Impulse Responses," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 652-660, November.
- James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
- Silvia Goncalves & Lutz Kilian, 2007. "Asymptotic and Bootstrap Inference for AR(∞) Processes with Conditional Heteroskedasticity," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 609-641.
- Kuersteiner, Guido M., 2001.
"Optimal instrumental variables estimation for ARMA models,"
Journal of Econometrics,
Elsevier, vol. 104(2), pages 359-405, September.
- Guido M. Kuersteiner, 1999. "Optimal Instrumental Variables Estimation for ARMA Models," Working papers 99-07, Massachusetts Institute of Technology (MIT), Department of Economics.
- Lewis, Richard & Reinsel, Gregory C., 1985. "Prediction of multivariate time series by autoregressive model fitting," Journal of Multivariate Analysis, Elsevier, vol. 16(3), pages 393-411, June.
- Eric M. Leeper & Tao Zha, 2003.
"Modest policy interventions,"
2003-24, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2002. "Modest policy interventions," Working Paper 2002-19, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 1999. "Modest policy interventions," Working Paper 99-22, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2002. "Modest Policy Interventions," NBER Working Papers 9192, National Bureau of Economic Research, Inc.
- Lütkepohl, Helmut & Poskitt, D.S., 1991. "Estimating Orthogonal Impulse Responses via Vector Autoregressive Models," Econometric Theory, Cambridge University Press, vol. 7(04), pages 487-496, December.
- Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, vol. 95(1), pages 161-182, March.
- Selva Demiralp & Kevin D. Hoover, 2003.
"Searching for the Causal Structure of a Vector Autoregression,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 65(s1), pages 745-767, December.
- Kevin Hoover & Selva Demiralp, 2003. "Searching for the Causal Structure of a Vector Autoregression," Working Papers 33, University of California, Davis, Department of Economics.
- Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
- Holló, Dániel & Kremer, Manfred & Lo Duca, Marco, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
- Furceri, Davide & Zdzienicka, Aleksandra, 2012.
"How costly are debt crises?,"
Journal of International Money and Finance,
Elsevier, vol. 31(4), pages 726-742.
- Alan J. Auerbach & Yuriy Gorodnichenko, 2011.
"Fiscal Multipliers in Recession and Expansion,"
NBER Working Papers
17447, National Bureau of Economic Research, Inc.
- Laura Mayoral, 2005. "The Persistence of Inflation in OECD Countries:a Fractionally Integrated Approach," Working Papers 259, Barcelona Graduate School of Economics.
- Cai, Xiaoming & Den Haan, Wouter, 2009. "Predicting recoveries and the importance of using enough information," CEPR Discussion Papers 7508, C.E.P.R. Discussion Papers.
- Davide Furceri & Lorenzo E. Bernal-Verdugo & Dominique M. Guillaume, 2012. "Crises, Labor Market Policy, and Unemployment," IMF Working Papers 12/65, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer).
If references are entirely missing, you can add them using this form.