[R-SIG-Finance] Cholesky Decomposition in Impulse Response Functions

Brian G. Peterson brian at braverock.com
Wed Sep 2 11:44:20 CEST 2015

On 09/02/2015 03:37 AM, Johannes Lips wrote:
> I am wondering if there's a way to tell the irf() command, in which
> order the cholesky decompostion should have. In other words how can I
> tell the irf command in which way the simultaneous effects should be
> modeled? Is it somehow based on the order of the variables in the
> var.est object?
> It would be great, if someone could shed some light on this, because I
> also couldn't find anything on the internet.

You didn't mention that you were speaking of the irf function from 
package vars, but I'll proceed on that assumption.

It seems that you can answer your own question by looking at the source.

vars::irf dispatches to one of:


all of these, in turn, call


and/or an appropriate


and/or an appropriate



from examination of the Phi functions, it appears that the recursive 
portion you're looking for is there, and does the matrix math over the 
inverse of the A matrix.

However, the ordering of variables seems to be a simple lapply over 
coef. in the coef methods.

So, not quite an answer, but hopefully I've pointed you towards where 
your answer lies.



Brian G. Peterson
Ph: 773-459-4973
IM: bgpbraverock

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