Significance of impulse response VAR

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sofp
Posts: 13
Joined: Mon Jul 04, 2016 2:48 pm

Significance of impulse response VAR

Postby sofp » Fri Aug 05, 2016 3:02 pm

Hi,

i'm estimating an unrestricted VAR and right now I went thought the impulse response function. I don't understand how to read the significance of the IRF. For example I don't understand on which basis from the IRF graph I can say that real GDP response to oil price shock is whether significant or insignificant.

Thanks.

dakila
Posts: 452
Joined: Tue Nov 24, 2015 4:57 pm

Re: Significance of impulse response VAR

Postby dakila » Fri Aug 05, 2016 6:28 pm

If the confidence interval (or band) does not contain zero (horizontal axis) then it is statistically significant.

sofp
Posts: 13
Joined: Mon Jul 04, 2016 2:48 pm

Re: Significance of impulse response VAR

Postby sofp » Sun Aug 07, 2016 2:14 am

Thank you for your answer. I'm still a little bit confused about it. So can I ask you to give me an example based one these impulse responses? Thanks
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dakila
Posts: 452
Joined: Tue Nov 24, 2015 4:57 pm

Re: Significance of impulse response VAR

Postby dakila » Sun Aug 07, 2016 2:24 am

dlogrgdp to dlogop: impulse responses are insignificant for all periods
dlogop to dlogop: impulse responses are significant for 1st period (impact period)
dlogstir to dlogop: impulse responses are significant for 2nd period
dlogltir to dlogop: impulse responses are significant for 1st period (impact period)

sofp
Posts: 13
Joined: Mon Jul 04, 2016 2:48 pm

Re: Significance of impulse response VAR

Postby sofp » Sun Aug 07, 2016 2:43 am

Thank you so much!

soetirl13
Posts: 2
Joined: Wed May 16, 2018 10:24 am

Re: Significance of impulse response VAR

Postby soetirl13 » Fri May 18, 2018 8:34 am

Hi,

just wondering. What does it mean when it's insignificant? is it meaningless then??

startz
Non-normality and collinearity are NOT problems!
Posts: 3747
Joined: Wed Sep 17, 2008 2:25 pm

Re: Significance of impulse response VAR

Postby startz » Fri May 18, 2018 9:11 am

All it means is that there is not strong statistical evidence that the response is different from zero.

ericsugandi
Posts: 3
Joined: Thu Mar 18, 2021 10:07 pm

Re: Significance of impulse response VAR

Postby ericsugandi » Sat Jul 16, 2022 7:07 pm

@dakila: Is there any textbook or other material that I can refer to on how to interpret IRF confidence intervals as you did? Thanks very much for your help.

virenrehal
Posts: 3
Joined: Thu Sep 22, 2022 3:07 am

Re: Significance of impulse response VAR

Postby virenrehal » Fri Sep 23, 2022 12:10 am

As requested, this link contains information on the estimation and interpretation of IRFs (Impulse Responses) for both VAR and VECM: https://spureconomics.com/impulse-response-functions-after-var-and-vecm/

The interpretation is quite straightforward, although it does depend on how the IRFs are computed. Generally, they are computed using shocks in terms of Standard Deviation or in terms of absolute values of the variables.

aawoad
Posts: 8
Joined: Thu Dec 24, 2020 1:49 am

Re: Significance of impulse response VAR

Postby aawoad » Fri Jan 06, 2023 10:42 am

Hello everyone
I have a question on the same matter
What is the link between causality, PVAR findings, and impulse response (IRF) in PVAR? If the causality shows a significant bidirectional relationship between X and Y variables, do the IRF should reflect the same? Also, if the PVAR results show X has a significant impact on Y, do the IRF should reflect the same?
Feedback is highly appreciated


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