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From |
jdasmith@gmx.com |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Units of measurement in IRFs in structural VAR models |

Date |
Fri, 13 Dec 2013 16:00:37 -0500 |

I estimated a structural VAR (SVAR) model and obtained the simple impulse response functions (IRF), the orthogonal impulse response functions (OIRF), and the structural impulse response functions (SIRF). I have a question about their interpretations. To fix the idea, assume this is a bivariate VAR model between I and C (both variables are stationary - forget about nonstationarity or cointegration; suppose both are measured in dollars). Suppose that in period 1, from C to I we find IRF=0.2, OIRF=0.3 (assuming order of C I), SIRF=0.4. My question is, how do we interpret these numbers, especially the SIRF? I know we usually just draw a graph but I need a little more than that. IRF=0.2, it means that if C increases by 1 dollar, I increases by $0.2 (but because the shocks are related, this interpretation is questionable - I got that). But for SIRF=0.4, which one of the following statements would be correct (or neither of them)? (1) If C increases by $1, I increases by $0.4. (2) If C increases by 1 standard deviation, I increases by 0.4 sd. I guess my question is really about the units of measurement of the SIRF. In EViews it appears that one can choose a one-unit shock ($1) or a one standard deviation shock. In Stata there is no such option. My question is, which one Stata uses, based on the SIRF reported? Any comments are appreicated. JD * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/faqs/resources/statalist-faq/ * http://www.ats.ucla.edu/stat/stata/

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