What is the shock in the BEAR toolbox, a unit shock or a standard deviation?
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I am running a BVAR model with triangular identification and I want to know what is the shock in the IRF, from the graphs provided
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Rishi
2024-1-3
Hi Franco,
I understand from your query that you want to know what the shock in the IRF in a BVAR model depicts. I am assuming that you are referring to the following 'irf' function in The BEAR toolbox:
This function uses a standard approach to simulate IRFs in VAR models, where a shock is typically standardized to a one-unit incease in the error term of the equation for the variable of interest. However, the code does not explicitly normalize the shock to represent a one standard deviation shock.
In summary, the function computes IRFs for each endogenous variable to unit shocks in each of the other variables.
But when we refer to the built-in MATLAB function 'irf' for VAR models, the shocks are standard deviations. You can refer to the below documentation to learn more:
Hope this helps!
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Singh basne
2024-8-9,14:32
I want to use 25 basis point of monetary policy shock. In that case there is no option available in App of BEAR toolbox. How can i do this in bear toolbox? please help
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