ON THE ASYMPTOTIC DISTRIBUTION OF IMPULSE RESPONSE FUNCTIONS WITH LONG-RUN RESTRICTIONS

Peter Vlaar ()

Econometric Theory, 2004, vol. 20, issue 5, 891-903

Abstract: This paper adopts a two-step technique to estimate structural vector error correction models and provides the asymptotic distribution of the impulse response functions of such a system. The method combines two popular tools in econometrics, namely, vector autoregressive cointegration analysis in the first step and structural vector autoregression analysis in the second. The proposed structural model structure is very general in the sense that all just-identifying or overidentifying schemes that can be expressed as linear restrictions on either the contemporaneous or long-run impact of the structural shocks are allowed for. The long-run restrictions complicate the derivation of the asymptotic distribution of the structural parameter estimates as these restrictions are a function of the reduced form parameters. Consequently, the asymptotic distribution involves an extra partial derivative.Useful comments by Peter Boswijk, Günter Coenen, Neil Ericsson, Sören Johansen, Klaus Neusser, Franz Palm, Paolo Paruolo, Peter van Els, Anders Warne, and ESEM 1998 participants are gratefully acknowledged. The paper also significantly benefited from suggestions by the co-editor Pentti Saikkonen and two anonymous referees.

Date: 2004
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