Questions tagged [impulse-response]

The response of an endogenous system to an exogenous shock. This is an important topic in time-series econometrics.

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How should interpret the irf derived from a VAR in differences?

For example, I have two series: price and sales and they are non-stationary. I took the first difference of them to make them stationary. I then use the differenced sales and price to set up a VAR(p) ...
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23 views

Can I use breaking series as a regressor in a VAR model?

Context: I have two series, price and sales. Sales is mean-reverting stationary but price is stationary only after controlling for an intercept break. I want to set up a 2-equation VAR model and the ...
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12 views

How to assess the impact of an exogenous on endogenous variables in VAR

I fitted a VAR model that includes an exogenous variable, and I am interested in assessing the impact of the exogenous variable on the endogenous variable. As far as I know, IRFs (impulse response ...
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VECM - Impulse reponse function - statsmodels - AttributeError: 'lr_effects'

I am using statsmodels version '0.11.1'. I am trying to sum cumulative effects of using the impulse response function derived of a VECM, but I am getting an AttributeError regarding 'lr_effects'. As ...
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Interpretation of Unorthogonalized Impulse Response Function

Sorry for this newbie question, but I googled quite a while and could't find a satisfactory answer. I post my question here. Suppose I have a VAR(1) model: $Y_{1, t} = A_{11}Y_{1, t-1} + A_{12} Y_{2, ...
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Interpretation of an impulse response compared to an accumulated impulse response

The general IRF is given as $$ IRF(h,\mathcal{I}_{t-1},\delta_j) = \mathbb{E}[x_{t+h}|\epsilon_{j,t}=\delta_j,\mathcal{I}_{t-1}] - \mathbb{E}[x_{t+h}|\mathcal{I}_{t-1}] $$ with $\delta_j$ being the ...
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R: Column ordering and Orthogonalized Impulse Response with vars

I fail to understand how the ordering of the columns affects the Impulse Response Function (and to synchronize this understanding with the output of the excellent ...
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25 views

Different way to obtain Cointegration Impulse response

If my memory is correct, we can obtain the impulse response function (irf) with bivariate VECM . However, I read some researcher just difference the variables under the pre-specified relation. For ...
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Analytic confidence bands for generalized impulse response function

I would like to ask about the way asymptotic confidence bands for generalized impulse response functions (VAR) are calculated. On the paper by Warne (2008) available on the following link: http://www....
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54 views

Time series - measure impact of another time series variable

I am looking for some techniques that would help me measure the (over-time) impact of a variable to another. So let's say we have annual time series data for GDP for 5 countries and I wanted to see ...
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50 views

Help estimating shocks in a VAR-model

I have estimated a two-dimensional VAR-model with one lag. Hence, a bivariate VAR(1) $$y_t = A_1t_{t-1} + u_t$$ I want to see the effect a positive two standard deviation shock at time $t-1$ in one ...
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VAR IRF for GPD with all GDP components

My question is twofold (hope it's ok). I want to estimate VAR model with the sole purpose of analysing the impulse response functions. I want to analyse the response of GDP to shock in exports and ...
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33 views

Why impulse responses are so weird in this exercise?

I ran my VAR model with inflation, real gdp, a proxy for fiscal policy and a policy indicator. I used the function externalinstrument in R and followed this ...
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47 views

Cointegrated VAR impulse response function

I have two variables Consumption(c) and Earning(e). According to the thesis, c and e are cointegrated. So the author differences to two variables to be Diff_C and ct-et and get the stationary part. ...
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108 views

How to get Impulse Response Function for non stationary data

I am currently working on a model where I am trying to compute the response of macroeconomic variables like gdp and CPI as well as Gini Koefficient to monetary policy shocks. My problem now is I have ...
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How to build confidence intervals and how to decide how many n-ahead periods in VAR?

I am fitting my VAR model and I have a few questions about it. It is better to explain my doubts with a concrete example (the code is produced using R). The dataset is monthly data on a variety of ...
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20 views

Using ARMAIRF in matlab

Using Matlab's [beta,Sigma,E,CovB,logL] = mvregress function, I have conducted an OLS for two models: ...
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21 views

Impulse response and omitted variables

I have a question regarding VAR and especially IRF. Lets say you have three variables: policy rate, long term interest rates and short term interest rates. Let's say I'm only interested in the effect ...
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Impulse response functions in VAR & VEC models

Im using VAR & VEC IRFs to estimate price elasticity (estimate change in demand for a 1 unit 'shock' to price) and Id like to compare results from both VAR & VEC models, where appropriate. Im ...
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35 views

Econometrics: Creating Impulse Response Functions

I am currently busy studying asymmetric price transmission in the global stainless steel value chain. I have not been able to replicate the impulse response functions that are shown below. I am more ...
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178 views

VECM Impulse Response Function: Interpretation of Results

I estimated a VECM and generated Generalised Impulse Response Functions based on Johansen Cointegration. Below is an output of two response variables to a shock in GDP. My issue is, I have strong ...
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106 views

Deseasonalize data AND deflate with CPI?

I have property return variables and economic variables that I am using in a VECM/VAR to generate Impulse Response Functions. I have deflated my data with CPI, but do I also have to deseasonalize the ...
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Impulse Response Functions R: Transitory Shocks for Non-Stationary Data

I am working on generating Impulse Response Functions via the VECM and VAR models, an hence have data that is non-stationary in levels, stationary in first differences and cointegrated. My IRFs ...
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124 views

VECM and Impulse Response Functions in R: Trend and Stationarity [duplicate]

I am looking to ultimately generate Impulse Response Functions and plotting them for a set of variables. These variables are all non-stationary in levels when a lag order of 5 is selected. They are ...
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Impulse responses - Mean, Median or Point estimate?

Im thinking about what is the most reasonable way to plot impulse responses in a simple OLS VAR model independent of the identification strategy. ${Y}_t = A_1{Y}_{t-1}+ U_t$ I have learned that the ...
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Generalized Impulse responses VAR(2)

I have a VAR(2) model: $\textbf{y}_t=\textbf{A}_1\textbf{y}_{t-1}+\textbf{A}_2\textbf{y}_{t-2}+\textbf{u}_t$ where $\textbf{y}_t$ is a 2x1 vector, $\textbf{A}_1, \textbf{A}_2$ are two 2x2 matrices ...
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How to interpret impulse response analysis in VAR when using standardized variables?

How to interpret impulse response analysis when using standardized variables (ie., subtracting the mean and divide by standard deviation) in vector autoregression analysis? The reason why I ...
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1answer
638 views

The theory behind fitting an ARIMAX model

I'm very familiar with the theoretical underpinnings of ARIMA/SARIMA models but I've been struggling to understand the theory behind fitting an ARIMAX model. I'm not looking for a practical ...
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114 views

Correcting for ARCH effect in VAR and impulse response results

I find significant ARCH effect in my series when running a VAR analysis $Y_t=(y_{1,t};y_{2,t};y_{3,t};y_{4,t};y_{5,t})^\top$ I have two questions: Does the ARCH effect impact the impulse response ...
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2k views

Interpretation of the Impulse Response Function - VAR Estimation

I have some issues while discussing and interpreting this impulse response function (the graphics analysis). What do they mean and represent economically? What can the conclusions be? Basically ...
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72 views

Cointegration: comparing IRF for the univariate ECT, versus for the multivariate VECM?

Assume we have $k$ I(1) variables, cointegrated of rank $r = 1$. By cointegration, I know that the error-correction term (ECT) is itself a I(0) univariate process. Assume now I am interested in the ...
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892 views

Impulse response: Interpreting shock and response for log-variables

I have a question related to the interpretation of Impulse Response Function (IRF) functions. Assume we do have two time-series that have been both log-transformed and are stationary. When applying a ...
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Impulse response for general VAR lag-p model: when does it converge?

Consider the VAR lag-p model: $$Bx_t = \Gamma_0 + \sum_{i=1}^p\Gamma_i x_{t-i} + \epsilon_t,\quad x_t\in\Bbb R^n,\,\forall t\in\Bbb Z$$ Setting $B$ to be upper-triangular and $A_0:=B^{-1}\Gamma_0,\,...
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336 views

Direction of orthogonalization in the `vars` package in R

I could not find anything in the documentation of this package R vignette of vars package or anywhere else on the internet. In case one estimates orthogonalized impulse response functions, the ...
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1answer
780 views

Can I use a VAR in first differences despite having co-integrated data?

I have two variables. Both are I(1), so non-stationary in levels but stationary in first differences. However, having run some tests, I find that both are co-integrated. Based on my statistics ...
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Modelling different types of responses to a series of drug concentrations

I have been performing dose response experiments on cancer and control patients for cell counts, apoptosis (flow cytometry DAPI-AnnexinV staining), intracellular protein staining on flow cytometry and ...
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285 views

Fluctuation in Impulse Responses

I try to set up a basic first differences VAR_Model: when I plot the IRF it looks like this: The fluctuation seems suspiciously wrong to me. Of course, the coefficients in my model also change the ...
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1answer
138 views

About modelling transient effect on time series

I'm working on a time series model which predicts daily sales. Below is a simplified depiction of the time series I'm trying to model. It is a stationary series and it takes certain 'shock'(drastic ...
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12k views

Interpretation of Impulse Response and Variance Decomposition Graphs

I am finding it difficult to interpret the following Impulse response and variance decomposition graphs-basically studying the effect of currencies on each other(I know the results from the Granger ...
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1answer
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Looking for techniques to understand the impact of a discrete events (interventions) on a continuous response variable in time series

I am trying to model the effect of one or more discrete interventions (e.g., taking a pill, attending therapy) on a continuous outcome (e.g., pain level of a patient over time). The features are ...
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1answer
3k views

How to explain and interpret impulse response function (for timeseries)?

I am wondering how impulse response captures information differently than other statistical techniques such as cross_correlation? To elaborate on what I mean, I will describe an example I encountered. ...
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540 views

SVAR and Impulse Response function

i cannot figure the difference between a VAR (vector autoregressive) and the Structural VAR (SVAR). Beside the math, I would like to have a simple explanation of how the SVAR differs from the VAR. ...
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909 views

Cholesky Shock - Interpretation of logs in IRF Models

I came across a few articles here and there that conclude: When the data (say variables X, Y) for an impulse response function are on log level, the y-axis depicts the % response of Y to a 1% shock ...
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311 views

Calculating orthogonalized impulse response functions for vector error corrrection models

Background: I am working on orthogonal impuls response functions (OIRFs) for vector error correction models (VECMs). Its an exercise to develop understanding. I am given a bivariate VECM: $$ \Delta ...
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690 views

FAVAR impulse responses

I am doing FAVAR analysis with two-step principal component method. I have estimated VAR including factors obtained using principal component analysis and assumption that variables can be divided to ...
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1answer
765 views

Can I use binary variables in VAR? How to interpret the IRF?

I am trying to forecast a time series based on other monthly time series variables. The variables are: endog -> number of users; exog -> marketing campaigns(in euros), Number of Updates, number of ...
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945 views

Is normality of residuals necessary for drawing conclusions from Impulse Response function

I know the issue of normality of residuals has been discussed here quite a lot, and I've learned that there are some cases in which it can be a less important hypothesis to test, while more critical ...
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438 views

IRF function with several exogenous covarites (SVAR model)

How to interpret an IRF function with exogenous covariates. Example: Small open economy which I control for foreign variables (Endogenous variables cannot influence the exogenous variables). The ...
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138 views

Extension to IRF functions for Cointegrated VAR model?

I have question relating to how to interpret an Impulse response function in a system of 5 endogenous non-stationary variables (GDP, Investment, Uncertainty index, Interest rate and inflation rate) ...
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45 views

Appropriate technique to extract the response function of a time series to two (or more) irregularly recurring stimuli

Say I poll a teenager every day about his overall happiness. Perhaps this has some long term trend, perhaps it has some short term trend. For sure, it is a noisy variable. Over the relevant time ...