IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Model-Free Impulse Responses

  • Oscar Jorda

    (Department of Economics, University of California Davis)

This paper introduces methods for computing impulse response functions that do not require specification and estimation of the unknown dynamic multivariate system itself. The central idea behind these methods is to estimate flexible local projections at each period of interest rather than extrapolating into increasingly distant horizons from a given model, as it is usually done in vector autoregressions (VAR). The advantages of local projections are numerous: (1) they can be estimated by simple regression techniques with standard regression packages; (2) they are more robust to misspecification; (3) standard error calculation is direct; and (4) they easily accommodate experimentation with highly non-linear and flexible specifications that may be impractical in a multivariate context. Therefore, these methods are a natural alternative to estimating impulse responses from VARs. An application to a simple, closed-economy monetary model suggests that the output loss and inflation effects of an interest rate shock depend on the stage of the business cycle.

If 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.

File URL: http://wp.econ.ucdavis.edu/03-8.pdf
Our checks indicate that this address may not be valid because: 500 Can't connect to wp.econ.ucdavis.edu:80 (10060). If this is indeed the case, please notify (Scott Dyer)


Download Restriction: no

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 38.

as
in new window

Length: 42
Date of creation: 26 Aug 2003
Date of revision:
Handle: RePEc:cda:wpaper:03-8
Contact details of provider: Postal: One Shields Ave., Davis, CA 95616-8578
Phone: (530) 752-0741
Fax: (530) 752-9382
Web page: http://www.econ.ucdavis.edu
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," Working Paper 95-6, Federal Reserve Bank of Atlanta.
  2. Evans, Charles L. & Marshall, David A., 1998. "Monetary policy and the term structure of nominal interest rates: Evidence and theory," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 53-111, December.
  3. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
  4. Oscar Jorda & Kevin Salyer, . "The Response of Term Rates to Monetary Policy Uncertainty," Department of Economics 01-06, California Davis - Department of Economics.
  5. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  6. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," Departmental Working Papers 200106, Rutgers University, Department of Economics.
  7. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense? A Reply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 943-48, November.
  8. James D. Hamilton & Oscar Jorda, 2000. "A Model for the Federal Funds Rate Target," NBER Working Papers 7847, National Bureau of Economic Research, Inc.
  9. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
  10. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-39, March.
  11. 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.
  12. Collard, Fabrice & Juillard, Michel, 2001. "A Higher-Order Taylor Expansion Approach to Simulation of Stochastic Forward-Looking Models with an Application to a Nonlinear Phillips Curve Model," Computational Economics, Society for Computational Economics, vol. 17(2-3), pages 125-39, June.
  13. Swanson, N.R. & Granger, C.W.J., 1994. "Impulse Response Functions Based on Causal Approach to Residual Orthogonalization in Vector Autoregressions," Papers 9-94-1, Pennsylvania State - Department of Economics.
  14. William Poole, 1999. "Monetary policy rules?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-12.
  15. Christopher A. Sims & Jinill Kim & Sunghyun Kim, 2003. "Calculating and Using Second Order Accurate Solution of Discrete Time Dynamic Equilibrium Models," Computing in Economics and Finance 2003 162, Society for Computational Economics.
  16. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  17. Rudebusch, G.D., 1996. "Do Measures of Monetary Policy in a VAR Make Sense?," Papers 269, Banca Italia - Servizio di Studi.
  18. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
  19. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-15, March.
  20. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  21. Simon M. Potter, 1999. "Nonlinear impulse response functions," Staff Reports 65, Federal Reserve Bank of New York.
  22. Hamilton, James D., 1999. "A Parametric Approach to Flexible Nonlinear Inference," University of California at San Diego, Economics Working Paper Series qt68s8157x, Department of Economics, UC San Diego.
  23. 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.
  24. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1994. "Identification and the effects of monetary policy shocks," Working Paper Series, Macroeconomic Issues 94-7, Federal Reserve Bank of Chicago.
  25. Jinill Kim & Sunghyun Kim & Ernst Schaumburg & Christopher A. Sims, 2003. "Calculating and Using Second Order Accurate Solutions of Discrete Time," Levine's Bibliography 666156000000000284, UCLA Department of Economics.
  26. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
  27. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
  28. Thapar, Aditi, 2008. "Using private forecasts to estimate the effects of monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 806-824, May.
  29. repec:cup:cbooks:9780521634809 is not listed on IDEAS
  30. 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.
  31. Peter C.B. Phillips, 1995. "Impulse Response and Forecast Error Variance Asymptotics in Nonstationary VAR's," Cowles Foundation Discussion Papers 1102, Cowles Foundation for Research in Economics, Yale University.
  32. Barro, Robert J, 1978. "Unanticipated Money, Output, and the Price Level in the United States," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 549-80, August.
  33. John H. Cochrane & Monika Piazzesi, 2002. "The Fed and Interest Rates: A High-Frequency Identification," NBER Working Papers 8839, National Bureau of Economic Research, Inc.
  34. Weiss, Andrew A., 1991. "Multi-step estimation and forecasting in dynamic models," Journal of Econometrics, Elsevier, vol. 48(1-2), pages 135-149.
  35. Lin, Jin-Lung & Tsay, Ruey S, 1996. "Co-integration Constraint and Forecasting: An Empirical Examination," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 519-38, Sept.-Oct.
  36. Gali, Jordi, 1992. "How Well Does the IS-LM Model Fit Postwar U.S. Data," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 709-38, May.
  37. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:03-8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.