Benkwitz, Alexander Lütkepohl, Helmut Wolters, Jürgen
SFB 373 Discussion Paper No. 1999,29
It is argued that standard impulse response analysis based on vector autoregressive models has a number of shortcomings. Although the impulse responses are estimated quantities, measures for sampling variability such as confidence intervals are often not provided. If confidence intervals are given they are often based on bootstrap methods with poor theoretical properties. These problems are illustrated using two German monetary systems. Proposals are made for improving current practice. Special emphasis is placed on systems with cointegrated variables.
monetary policy bootstrap impulse response money demand system