Interpreting Accumulated Impulse Response graphs for SVAR Models

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greenpandy
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Joined: Mon Jul 30, 2018 10:45 am

Interpreting Accumulated Impulse Response graphs for SVAR Models

Postby greenpandy » Tue Aug 28, 2018 12:50 pm

Hi, I am fairly new to EViews and have a few questions about SVAR models using EViews 10.

I am doing a study similar to this one https://researchportal.port.ac.uk/porta ... ing_GF.pdf except with updated data just for the UK. On page 14 it discusses the graph shown on page 27 (Figure 3), however I don't really understand the findings. The study states that positive government expenditure and interest rate shocks (shocks 4 and 6) cause a decline in the stock market (the bottom row of graphs, referred to as R_IND, i.e. the graph showing shock in government expenditure to stock market prices is titled 'Accumulated response of R_IND to shock 4').

1) Am I right in understanding that the authors have come to this conclusion because the zero line is not within the confidence intervals, therefore the result is significant?

The reason I am unsure is because the study then goes on to say that the only other determinant of the stock market, as evidenced from the impulse response functions, is GDP (shock 2). Positive GDP shock = slight increase in stock market. However I can't see why this would be from the graph (Accumulated response of R_IND to Shock2), as zero is within the confidence intervals?

Also, if possible, could you briefly run me through how to interpret these graphs? I.e. later on they discuss how two of the variables (R_GOV and R_INT) react in a counter-cyclical manner in response to shock 3 etc. I have created my own study with different data and produced similar graphs and will need to be able to interpret them.

Thank you!

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