Transcription of Teaching Notes on Impulse Response Function and …
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Teaching Notes on Impulse Response Function and …
Teaching Notes on Impulse Response Functionand Structural VARJin-Lung LinInstitute of Economics, Academia SinicaDepartment of Economics, National Chengchi UniversityMay 2, 20061 IntroductionStructural VAR embeds economic theory within time series models, providing aconvenient and powerful framework for policy analysis . Impulse Response func-tion (IRF) tracks the impact of any variable on others in the system. It is an essen-tial tool in empirical causal analysis and policy effectiveness analysis . This notereviews important concepts related to Impulse Response Function and Impulse Response functionLetYtbe ak-dimensional vector series generated byYt=A1Yt 1+ +ApYt p+Ut= (B)Ut= i=0 iUt i(1)I= (I A1B A2B ApBp) (B)(2)wherecov(Ut) = , iis the MA coefficients measuri
1 Introduction Structural VAR embeds economic theory within time series models, providing a convenient and powerful framework for policy analysis.
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