Projection estimators for structural impulse responses

Ralf Brueggemann (Uni Constanz)
Monday, November 25, 2013 - 2:00pm
Spandauer Strasse 1, Room 23

We consider projection estimators for impulse response functions (IRFs) in structural vector autoregressive (VAR) models. We derive a projection estimator for IRFs in structural VARs with a recursive structure and discuss its asymptotic properties. The result can be used to make simple inference on impulse response functions. We extend the projection approach for structural VAR with long-run restrictions and show how inference can be based on a simple instrumental variable method. We compare the finite sample properties of the traditional (‘iterated’) approach and the projection (`direct’) approach for estimating IRFs. Our results indicate that the projection-based method is more robust against model misspecification and hence may be an attractive alternative in applied work.