# Interpreting VAR impulse response

In R, I have two variables, x and y, and a basic VAR model with just one lag, i.e. (as I understand it) the model basically is:

x(t) = a*x(t-1) + b*y(t-1) + c + error1

y(t) = d*x(t-1) + e*y(t-1) + f + error2

with a,b,c,d,e,f some constants.

How do you interpret the irf output (impulse response coefficients)? What magnitude is the impulse and what are the irf plot y-axis units?

Specifically I was puzzled by the observation that when I scaled my two time series by multiplying both by 100, the irf plot y-axis values and impulse response coefficients were also multiplied by 100. I would have thought that they remain the same (e.g. "one unit shock in x(t) leads to units response in y(t+1)", and that the coefficient between the two does not depend on the units we use for both of the variables).

Can you help with the irf result interpretation and why the scaling leads to such a result?

• The "unit" in "unit-shock" is one standard-deviation. Oct 8, 2022 at 18:25