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An Algorithm for Generalized Impulse-Response Functions in Markov-Switching Structural VAR

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  • Frédéric Karamé

    ()
    (EPEE-TEPP (Université d’Evry-Val-d’Essonne and FR n°3126, CNRS), DYNARE Team (CEPREMAP), Centre d’Etudes de l’Emploi)

Abstract

We transpose the Generalized Impulse-Response Function (GIRF) developed by Koop et al. (1996) to Markov-Switching structural VARs. As the algorithm displays an exponentially increasing complexity as regards the prediction horizon, we use the collapsing technique to easily obtain simulated trajectories (shocked or not), even for the most general representations. Our approach encompasses the existing IRFs proposed in the literature and is illustrated with an applied example on gross job flows.

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Bibliographic Info

Paper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 12-04.

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Length: 12 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:eve:wpaper:12-04

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Keywords: structural VAR; Markov-switching regime; generalized impulse-response function;

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  1. Weise, Charles L, 1999. "The Asymmetric Effects of Monetary Policy: A Nonlinear Vector Autoregression Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 85-108, February.
  2. John Haltiwanger & Steven J. Davis, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December.
  3. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  4. Ehrmann, Michael & Ellison, Martin & Valla, Natacha, 2003. "Regime-dependent impulse response functions in a Markov-switching vector autoregression model," Economics Letters, Elsevier, vol. 78(3), pages 295-299, March.
  5. Maximo Camacho & Gabriel Perez-Quiros, 2013. "Commodity prices and the business cycle in Latin America: Living and dying by commodities," Banco de Espa�a Working Papers 1304, Banco de Espa�a.
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  7. Sensier, Marianne & Osborn, Denise R & Ocal, Nadir, 2002. " Asymmetric Interest Rate Effects for the UK Real Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(4), pages 315-39, September.
  8. Simon M. Potter, 1999. "Nonlinear impulse response functions," Staff Reports 65, Federal Reserve Bank of New York.
  9. Kim, C-J., 1991. "Dynamic Linear Models with Markov-Switching," Papers 91-8, York (Canada) - Department of Economics.
  10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  11. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
  12. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
  13. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 3-26, Summer.
  14. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
  15. Chauvet, Marcelle, 1998. "An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 969-96, November.
  16. Filardo, Andrew J, 1994. "Business-Cycle Phases and Their Transitional Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 299-308, July.
  17. Terasvirta, Timo, 1995. "Modelling Nonlinearity in U.S. Gross National Product 1889-1987," Empirical Economics, Springer, vol. 20(4), pages 577-97.
  18. Frédéric Karamé, 2010. "Impulse-Response Functions in Markov-Switching Structural Vector AutoRegressions: a Step Further," Documents de recherche 10-03, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
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Cited by:
  1. Markku Lanne & Henri Nyberg, 2014. "Generalized Forecast Error Variance Decomposition for Linear and Nonlinear Multivariate Models," CREATES Research Papers 2014-17, School of Economics and Management, University of Aarhus.

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