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Balanced bootstrap joint confidence bands for structural impulse response functions


Bruder, Stefan; Wolf, Michael (2017). Balanced bootstrap joint confidence bands for structural impulse response functions. Working paper series / Department of Economics 246, University of Zurich.

Abstract

Constructing joint confidence bands for structural impulse response functions based on a VAR model is a difficult task because of the non-linear nature of such functions. We propose new joint confidence bands that cover the entire true structural impulse response function up to a chosen maximum horizon with a prespecified probability (1 - α), at least asymptotically. Such bands are based on a certain bootstrap procedure from the multiple-testing literature. We compare the finite-sample properties of our method with those of existing methods via extensive Monte Carlo simulations. We also investigate the effect of endogenizing the lag order in our bootstrap procedure on the finite-sample properties. Furthermore, an empirical application to a real data set is provided.

Abstract

Constructing joint confidence bands for structural impulse response functions based on a VAR model is a difficult task because of the non-linear nature of such functions. We propose new joint confidence bands that cover the entire true structural impulse response function up to a chosen maximum horizon with a prespecified probability (1 - α), at least asymptotically. Such bands are based on a certain bootstrap procedure from the multiple-testing literature. We compare the finite-sample properties of our method with those of existing methods via extensive Monte Carlo simulations. We also investigate the effect of endogenizing the lag order in our bootstrap procedure on the finite-sample properties. Furthermore, an empirical application to a real data set is provided.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C12, C32
Uncontrolled Keywords:Bootstrap, impulse response functions, joint confidence bands, vector autoregressive process
Language:English
Date:March 2017
Deposited On:22 Mar 2017 14:22
Last Modified:07 Apr 2017 06:41
Series Name:Working paper series / Department of Economics
Number of Pages:66
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp246.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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