Hi everybody,
I am really sorry to bother you again on Cholesky decomposition, but I read all the previous posts about this subject but could not yet get the point.
I am trying to understand how to get the impulse responses to a 1% shock by using Cholesky ordering. I understand that I need to set up a user specified matrix (lower triangular), but I do not understand how I can set the magnitude of the shock so that I can see the responses of the other variables to the 1% shock, given the Cholesky ordering. I am using Eviews 7 and my VAR model has 3 variables.
I have my matrix:
a11 0 0
A = a21 a22 0
a31 a32 a33
I will have 1 in a11, but what about the other a?? components of the matrix? I would like to see the effects of a shock only on the first equation.
Thank you so much for your kind replies.
Best Regards
Step
Impulse responses
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