Inference of Impulse Responses via Bayesian Graphical Structural VAR Models

Daniel Felix Ahelegbey

Econometrics, 2025, vol. 13, issue 2, 1-20

Abstract: Impulse response functions (IRFs) are crucial for analyzing the dynamic interactions of macroeconomic variables in vector autoregressive (VAR) models. However, traditional IRF estimation methods often have limitations with assumptions on variable ordering and restrictive identification constraints. This paper applies the Bayesian graphical structural vector autoregressive (BGSVAR) model, which integrates structural learning to capture both temporal and contemporaneous dependencies for more accurate impulse response estimation. The BGSVAR framework provides a more efficient and interpretable method for estimating IRFs, which can enhance both forecasting performance and structural inferences in economic modelling. Through extensive simulations across various data-generating processes, we evaluate BGSVAR’s effectiveness in modelling dynamic interactions among US macroeconomic variables. Our results demonstrate that BGSVAR outperforms traditional methods, such as LASSO and Bayesian VAR (BVAR), by delivering more precise impulse response estimates and better capturing the structural dynamics of VAR-based models.

Keywords: Bayesian graphical model; Bayesian VAR; impulse response; orthogonalized; generalized; LASSO (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:13:y:2025:i:2:p:15-:d:1626420

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