Estimation of Impulse Response Functions When Shocks are Observed at a Higher Frequency than Outcome Variables

Alexander Chudik and Georgios Georgiadis

No 356, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper proposes mixed-frequency distributed-lag (MFDL) estimators of impulse response functions (IRFs) in a setup where (i) the shock of interest is observed, (ii) the impact variable of interest is observed at a lower frequency (as a temporally aggregated or sequentially sampled variable), (iii) the data-generating process (DGP) is given by a VAR model at the frequency of the shock, and (iv) the full set of relevant endogenous variables entering the DGP is unknown or unobserved. Consistency and asymptotic normality of the proposed MFDL estimators is established, and their small-sample performance is documented by a set of Monte Carlo experiments. The proposed approach is then applied to estimate the daily pass-through of changes in crude oil prices observed at a daily frequency to U.S. gasoline consumer prices observed at a weekly frequency. We find that the pass-through is fast, with about 28% of the crude oil price changes passed through to retail gasoline prices within five working days, and that the speed of the pass-through has increased over time.

Keywords: Mixed frequencies; temporal aggregation; impulse response functions; estimation and inference; VAR models (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2019-03-15
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ict and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Estimation of Impulse Response Functions When Shocks Are Observed at a Higher Frequency Than Outcome Variables (2022)
Working Paper: Estimation of impulse response functions when shocks are observed at a higher frequency than outcome variables (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:356

DOI: 10.24149/gwp356

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