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BVAR IRFs and Cholesky ordering
Posted: Thu Apr 13, 2023 4:06 am
by bcfc82
Hi, I am estimating some simple Litterman-prior BVARs. When I generate the impulse responses, the Cholesky ordering seems not to matter to the output (the other variables always responds with a one period lag, regardless of the ordering). Is this normal behaviour?
Re: BVAR IRFs and Cholesky ordering
Posted: Thu Apr 13, 2023 8:56 am
by EViews Gareth
Which version of EViews, and which type of IRF?
Re: BVAR IRFs and Cholesky ordering
Posted: Thu Apr 13, 2023 6:07 pm
by bcfc82
Eviews 13 and Litterman/ Minnesota prior BVARs. IRFs using Bayesian sampling, but I get the same results using the posterior/ empirical residual covariances.
Re: BVAR IRFs and Cholesky ordering
Posted: Mon Apr 17, 2023 3:53 pm
by EViews Kai
Yes, impulse response results should be invariant to Cholesky ordering under impulse methods that use a diagonal error covariance matrix.
Re: BVAR IRFs and Cholesky ordering
Posted: Tue Apr 18, 2023 8:26 pm
by bcfc82
OK, thanks. So the Bayesian IRF methods impose a diagonal cov matrix?
Re: BVAR IRFs and Cholesky ordering
Posted: Wed Apr 19, 2023 7:18 am
by EViews Gareth
The Litterman prior does, yes.