Error bands for impulse responses

Research output: Contribution to journalArticle

362 Scopus citations

Abstract

We show how correctly to extend known methods for generating error bands in reduced form VAR's to overidentified models. We argue that the conventional pointwise bands common in the literature should be supplemented with measures of shape uncertainty, and we show how to generate such measures. We focus on bands that characterize the shape of the likelihood. Such bands are not classical confidence regions. We explain that classical confidence regions mix information about parameter location with information about model fit, and hence can be misleading as summaries of the implications of the data for the location of parameters. Because classical confidence regions also present conceptual and computational problems in multivariate time series models, we suggest that likelihood-based bands, rather than approximate confidence bands based on asymptotic theory, be standard in reporting results for this type of model.

Original languageEnglish (US)
Pages (from-to)1113-1155
Number of pages43
JournalEconometrica
Volume67
Issue number5
DOIs
StatePublished - Jan 1 1999

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Bayesian methods
  • Confidence region
  • Impulse responses
  • Vector autoregression

Fingerprint Dive into the research topics of 'Error bands for impulse responses'. Together they form a unique fingerprint.

  • Cite this