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

Johannes Lips johannes.lips at gmail.com
Wed Sep 2 13:19:15 CEST 2015

On 02.09.2015 11:44, Brian G. Peterson wrote:
> 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:
> vars:::irf.svarest
> vars:::irf.svecest
> vars:::irf.varest
> vars:::irf.vec2var
> all of these, in turn, call
> vars:::.irf
> and/or an appropriate
> vars:::.bootirf[*]
> and/or an appropriate
> vars:::Phi.*
> function.
> 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.
Thanks Brian,

yeah, sorry for not being more specific. I was talking about the irf() 
from the vars package, which is also used by tsDyn as far as I can tell.
I will have a look into all these functions and will try to figure it 
out. I thought it might be documented somewhere, because it's fairly 
common in most other econometrics packages. (This is not meant as a rant!)
But I don't know how we could improve the documentation of all these 
packages and functions.


> 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.
> Regards,
> Brian

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