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Bandwidth-Free Inference for Recursive Nonlinear Impulse Response Functions

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  • Guilherme Vianna

Abstract

Recursive nonlinear impulse responses require an estimated innovation law whenever the impact shock is normalized by innovation ranks and future innovations are integrated out. The closest semiparametric recursive construction in the literature estimates the relevant innovation quantile functions smoothly and discusses a direct empirical-residual implementation without developing its complete first-order inference theory. We tackle this gap in a finite-dimensional nonlinear structural autoregression with unrestricted continuous marginal innovation distributions and a fixed normal-rank shock. Our estimator replaces each innovation quantile function with the empirical quantile of generated structural residuals and iterates the same structural transition. For any fixed collection of responses, we establish a joint \sqrt{T} asymptotic linear representation with four components: direct transition estimation, the effect of transition estimation on residual order statistics, ordinary innovation-quantile estimation, and the shifted impact quantile. After projection through the recursion, the quantile terms admit a residual-rank-and-spacing representation, yielding feasible inference without innovation-density estimation or quantile smoothing. We then characterize the propagated bias from smoothing, establish validity of a full recursive residual bootstrap, and derive the additional covariance contribution from a finite number of simulated paths, providing bandwidth-free inference for the empirical-residual version of the same normal-rank response used in the smooth recursive construction.

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  • Guilherme Vianna, 2026. "Bandwidth-Free Inference for Recursive Nonlinear Impulse Response Functions," Papers 2608.02943, arXiv.org.
  • Handle: RePEc:arx:papers:2608.02943
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    References listed on IDEAS

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    1. 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.
    2. Bai, J., 1994. "Stochastic Equicontinuity and Weak Convergence of Unbounded Sequential Empirical Proceses," Working papers 94-07, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Christian Gourieroux & Quinlan Lee, 2025. "Identification of Impulse Response Functions for Nonlinear Dynamic Models," Papers 2506.13531, arXiv.org, revised Jul 2025.
    4. Christian Gourieroux & Quinlan Lee, 2023. "Nonlinear Impulse Response Functions and Local Projections," Papers 2305.18145, arXiv.org, revised Aug 2025.
    5. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    6. 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.
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