Hi All,
I just would like to know since forecast error variance decomposition is a transformed version of impulse response functions, does it mean all the shocks appears in the impulse response graphs (IRF) to a variable must also appears in that variable's forecast error variance decomposition (FEVD)?
Thank you!
Kind regards,
Jesse
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relationship between IRF and FEVD
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relationship between IRF and FEVD
by Jesse » Mon Nov 14, 2016 3:05 pm
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Re: relationship between IRF and FEVD
by jpfeifer » Mon Nov 14, 2016 5:00 pm
Yes, all shocks that move a particular variable in an IRF will also contribute to its forecast error variance decomposition.
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