Working Paper

Estimating Impulse Response Functions When the Shock Series Is Observed

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: Monte Carlo experiments; Finite sample performance; Impulse-response functions; Observed shock;

JEL Classification: C50; C13;

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Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2019-03-04

Number: 353

Pages: 22 pages