Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229159
Authors: 
Inoue, Atsushi
Kilian, Lutz
Year of Publication: 
2020
Series/Report no.: 
CFS Working Paper Series No. 650
Abstract: 
We derive the Bayes estimator of vectors of structural VAR impulse responses under a range of alternative loss functions. We also derive joint credible regions for vectors of impulse responses as the lowest posterior risk region under the same loss functions. We show that conventional impulse response estimators such as the posterior median response function or the posterior mean response function are not in general the Bayes estimator of the impulse response vector obtained by stacking the impulse responses of interest. We show that such pointwise estimators may imply response function shapes that are incompatible with any possible parameterization of the underlying model. Moreover, conventional pointwise quantile error bands are not a valid measure of the estimation uncertainty about the impulse response vector because they ignore the mutual dependence of the responses. In practice, they tend to understate substantially the estimation uncertainty about the impulse response vector.
Subjects: 
Loss function
joint inference
median response function
mean response function
modal model
posterior risk
JEL: 
C22
C32
C52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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