pesavento_06

Emory University
Department of Economics
Working Papers

Title: Impulse Responses Confidence Intervals for Persistent Data: What Have We Learned?

Number: 06-03

Author: Elena Pesavento and Barbara Rossi

Issue Date: March 2006

Abstract: This paper is a comprehensive comparison of existing methods for constructing confidence bands for univariate impulse response functions in the presence of high persistence. Monte Carlo results show that Kilian (1998a), Wright (2000), Gospodinov (2004) and Pesavento and Rossi (2005) have favorable coverage properties, although they differ in terms of robustness at various horizons, median unbiasedness, and reliability in the possible presence of a unit or mildly explosive root. On the other hand, methods like Runkle's (1987) bootstrap, Andrews and Chen (1994), and regressions in levels or first differences (even when based on pre-tests) may not have accurate coverage properties. The paper makes recommendations as to the appropriateness of each method in empirical work.

Title:	Impulse Responses Confidence Intervals for Persistent Data: What Have We Learned?
Number:	06-03
Author:	Elena Pesavento and Barbara Rossi
Issue Date:	March 2006
Abstract:	This paper is a comprehensive comparison of existing methods for constructing confidence bands for univariate impulse response functions in the presence of high persistence. Monte Carlo results show that Kilian (1998a), Wright (2000), Gospodinov (2004) and Pesavento and Rossi (2005) have favorable coverage properties, although they differ in terms of robustness at various horizons, median unbiasedness, and reliability in the possible presence of a unit or mildly explosive root. On the other hand, methods like Runkle's (1987) bootstrap, Andrews and Chen (1994), and regressions in levels or first differences (even when based on pre-tests) may not have accurate coverage properties. The paper makes recommendations as to the appropriateness of each method in empirical work.

Click on the paper title to download the paper.

You may view the paper in the following formats:

The paper is in PDF format. Click here to download Adobe Acrobat Reader .

Links to
Economics Department Home Page
Emory University Home Page