A joint impulse response function for vector autoregressive models

Thomas Wiesen and Paul Beaumont

Empirical Economics, 2024, vol. 66, issue 4, No 5, 1553-1585

Abstract: Abstract Many applications call for measuring the response due to shocks from several variables at once. We introduce a joint impulse response function (jIRF) that is independent of the order of the variables and allows for simultaneous shocks from multiple variables in the VAR, rather than one at a time as in the generalized IRF. The proposed jIRF controls for the cross-correlations of the several simultaneous shocks. As an application of the jIRF, we study the effect of the COVID-19 pandemic on trans-Atlantic volatility transmissions across large financial institutions and show that simply summing the generalized IRFs overestimates volatility transmissions.

Keywords: Coronavirus; COVID-19; Generalized IRF; Forecast error variance decomposition; International financial spillovers; Multiple shocks; Simultaneous impulses; Volatility transmissions (search for similar items in EconPapers)
JEL-codes: C32 C53 F37 G15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00181-023-02496-6

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