[R] vars package, impulse response functions ??

[Pfaff, Bernhard Dr.]

Hello Spencer,

impulse response analysis is wrong tool for your investigation. What you
are after is the final form of your model, i.e., the endogenous
variables are only dependent on your exogenous variables including
deterministic regressors: y_t = A(L)^-1 B(L) x_t. The key word is then
multiplicator analysis as used in the context of structural multiple
equation models. Depending on your objective you can then retrieve from
the final form of your model impact-, intermediate- and long-run
mutlipliers. This is outlined for instance in the monographs:

@book{BOOK,
author={George G. Judge and William E. Griffiths and R. Carter Hill and
Helmut L{\"u}tkepohl and Tsoung-Chao Lee},
title={The Theory and Practice of Econometrics (Wiley Series in
Probability and Statistics)},
year={1985},
price={$131.95},
publisher={Wiley},
isbn={047189530X}
} 

@book{BOOK,
author={George G. Judge and R. Carter Hill and William E. Griffiths and
Helmut L{\"u}tkepohl and Tsoung-Chao Lee},
title={Introduction to the Theory and Practice of Econometrics, 2nd
Edition},
year={1988},
publisher={Wiley},
isbn={0471624144}
} 

@book{BOOK,
author={Helmut L{\"u}tkepohl},
title={New Introduction to Multiple Time Series Analysis},
year={2007},
price={$49.68},
publisher={Springer},
isbn={3540262393}
} 

Now, to your problem at hand. You can retrieve the relevant coefficients
by using A() and B() and then you have to set up the final form by hand.
You can then compute the multipliers you are interest in. Please note,
that the VAR is estimated by OLS. You might want to consider estimating
the VAR by FGLS if you have restrictions in your VAR.

Best,
Bernhard

ps: The more you are "approaching" structural multiple equation model,
you can also use the CRAN-package systemfit 


>I am fitting a reduced form VAR model using VAR in the vars 
>library. I have
>several endogenous variables, and two exogenous variables. I 
>would like to
>explore the effects of a shock to one of the exogenous 
>variables on one of
>the endogenous variables. Using irf in the vars library only 
>calculates the
>irf for the endogenous variables, this is obviously by design, 
>is there some
>theoretical restriction on why it is not possible to look at 
>the irf's from
>exogenous shocks?  Is there anyway to look at the effects of exogenous
>shocks in R? Do I need to consider some sort of structural model?
>
>the following code sample illustrates what I am trying to do  and the
>problems I am having (I am not an econometrician, but I know 
>that e would be
>better left as an endo variable, I just needed some common 
>data to show what
>I am trying to do)
>
>
>data(Canada)
>attach(Canada)
>v.can<-VAR(Canada[,2:4],exogen=e, p = 2, type = "both")
>
>irf(v.can,impulse= "e", response="prod")
>
>thanks again,
>
>Spencer
>
>	[[alternative HTML version deleted]]
>
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