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Estimating Impulse Response Functions When the Shock Series Is Observed

Chi-Young Choi () and Alexander Chudik

No 353, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: We compare the finite sample performance of a variety of consistent approaches to estimating Impulse Response Functions (IRFs) in a linear setup when the shock of interest is observed. Although there is no uniformly superior approach, iterated approaches turn out to perform well in terms of root mean-squared error (RMSE) in diverse environments and sample sizes. For smaller sample sizes, parsimonious specifications are preferred over full specifications with all ‘relevant’ variables.

Keywords: Observed shock; Impulse-response functions; Monte Carlo experiments; Finite sample performance (search for similar items in EconPapers)
JEL-codes: C13 C50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2019-03-04
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Journal Article: Estimating impulse response functions when the shock series is observed (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:353

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DOI: 10.24149/gwp353

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