How to explain and interpret impulse response function?
Impulse-response analysis is quite simple. Having estimated a vector autoregressive (VAR) model and expressed it in a vector moving-average (VMA) representation, you are able to see how a shock to variable B affects variable A in subsequent periods. You just plug in the shock in the VMA representation.
What does an IRF mean for an impulse variable?
An IRF indicates what is the impact of an upward unanticipated one-unit change in the “impulse” variable on the “response” variable over the next several periods (typically 10). IRFs do not have coefficients.
How to calculate standard deviation of impulse response?
One standard deviation is 37 in your case and you want to compute your own impact shock of 200. Then you would need to multiply all the responses to that shock by 200/37. Re: Interpreting impulse response functions: Std dev or % ?
How to plot the impulse response of EUR?
In your first graph you plot the impulse-response of EUR to EUR. At the initial period, a positive shock on EUR will obviously lead the EUR to go up by the shock amount – thus the initial value of one.
What is the impulse response function of Var?
The impulse response function of VAR is to analysis dynamic affects of the system when the model received the impulse. As our VAR model, we have four variables. We can work the response between these variables. In order to display the response function clearer, we plot the chart as figure 4 and figure 5.
Which is the moving average form of impulse response?
In impulse response analysis, the moving average form of the model is particularly convenient. The reason is that if you want to find the response of yt + h to a shock to ϵj, t, then if you start with the usual VAR(1) form yt + h = Πyt + h − 1 + ϵt + h, then there is no ϵt in your model as it stands,…