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| Title: | | Reducing confidence bands for simulated impulse responses  |
| Authors: | | Lütkepohl, Helmut |
| Issue Date: | | 2012 |
| Series/Report no.: | | Discussion Papers, German Institute for Economic Research, DIW Berlin 1235 |
| Abstract: | | It is emphasized that the shocks in structural vector autoregressions are only identified up to sign and it is pointed out that this feature can result in very misleading confidence intervals for impulse responses if simulation methods such as Bayesian or bootstrap methods are used. The confidence intervals heavily depend on which variable is used for fixing the sign of the initial responses. In particular, when the shocks are identified via long-run restrictions the problem can be severe. It is pointed out that a suitable choice of variable for fixing the sign of the initial responses can result in substantial reductions in the confidence bands for impulse responses. |
| Subjects: | | Vector autoregressive process impulse responses bootstrap Bayesian estimation |
| JEL: | | C32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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