Generalised Impulse Response Analysis in Linear Multivariate Models
Building on Koop, Pesaran and Potter (1996), the authors propose the `generalised' impulse response analysis for unrestricted vector autoregressive (VAR) and cointegrated VAR models. Unlike the traditional impulse response analysis, this approach does not require orthogonalisation of shocks and is invariant to the ordering of the variables in the VAR. In particular, it is shown that in general both generalised and orthogonalised impulse responses are equivalent only when the effects of the shock for the first equation in the VAR is examined. An empirical illustration is also provided showing that the two impulse responses could differ substantially.
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- King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991.
"Stochastic Trends and Economic Fluctuations,"
American Economic Review,
American Economic Association, vol. 81(4), pages 819-40, September.
- Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
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- Pesaran, M.H. & Shin, Y., 1993.
"Cointegration and Speed of Convergence to Equilibrium,"
Cambridge Working Papers in Economics
9311, Faculty of Economics, University of Cambridge.
- Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 117-143.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
- 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.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, December.
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