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st: re: irf: change innovation


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: irf: change innovation
Date   Mon, 20 Oct 2008 07:36:36 -0400

<>
Nadine said

I want to create an irf for a negative innovation. I read that the standard innovation is a positive one-unit shock and I was wondering whether/ how it
is possible to change the type of the innovation?


For a linear IRF, or impulse response function (which will be forthcoming from a linear VAR) the effect of (k x \sigma) is k times the effect of 1 \sigma, where k is any real number (including -1). Thus one can calculate the effect of any scaling of the standard +1 \sigma shock from the reported IRF.

Nonlinear IRFs (resulting from nonlinear models) generally require something like Monte Carlo simulation, as with a nonlinear IRF the magnitude of (k x \sigma) is not predictable from +1 \sigma. The IRF may be asymmetric. For something along these lines see Baum, Caglayan, Ozkan, J Applied Econometrics 2004, available in working paper form (BC EC WP 488) from my homepage below.

Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:e
http://www.stata-press.com/books/imeus.html


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