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Which Impulse Response Function?

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  • Ronayne, David
Abstract
This paper compares standard and local projection techniques in the production of impulse response functions both theoretically and empirically. Through careful selection of a structural decomposition, the comparison continues to an application of US data to the textbook ISLM model. It is argued that local projection techniques offer a remedy to the bias of the conventional method especially at horizons longer than the vector autoregression‘s lag length. The application highlights that the techniques can have different answers to important questions.

Suggested Citation

  • Ronayne, David, 2011. "Which Impulse Response Function?," Economic Research Papers 270753, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:270753
    DOI: 10.22004/ag.econ.270753
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    3. Luca Brugnolini, 2018. "About Local Projection Impulse Response Function Reliability," CEIS Research Paper 440, Tor Vergata University, CEIS, revised 09 Jun 2018.
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    12. Francesca G. Caselli & Agustin Roitman, 2019. "Nonlinear exchange‐rate pass‐through in emerging markets," International Finance, Wiley Blackwell, vol. 22(3), pages 279-306, December.
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