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Which Impulse Response Function?

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  • Ronayne, David

    (University of Warwick)

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    Abstract

    This paper compares standard and local projection techniques in the production of impulse response functions both theoretically and empirically. Through careful selection of a structural decomposition, the comparison continues to an application of US data to the textbook ISLM model. It is argued that local projection techniques offer a remedy to the bias of the conventional method especially at horizons longer than the vector autoregression‘s lag length. The application highlights that the techniques can have different answers to important questions.

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2011/twerp_971.pdf
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    Bibliographic Info

    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 971.

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    Date of creation: 2011
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    Handle: RePEc:wrk:warwec:971

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