bvar_irf

[iona]

Hi, I am trying to estimate a BVAR model but before displaying the impulse responses functions I receive the following message: ”Some of the VAR models sampled from the posterior distribution
were found to be explosive”. Is there any alternative to solve this problem?
Thank you very much!

[jpfeifer]

Is this only a warning? Can you judge how large the problem is? Rejecting some draws from the posterior is not too problematic as long as it not a big share of the posterior mass.

Otherwise, you might have to adjust your prior in order to assign more mass to the stability region.

[iona]

Thank you very much. Yes. Indeed is a warning. I have noticed that when I use stationary data (difference of log) there are many ”var models sampled from the posterior distribution that are found to be explosive” but when I use HP-detrended data the number of samples found to be explosive significantly reduces and the irf plots look better.

[jpfeifer]

I hopy you are using a one-sided HP-filter. See Remark 12 (Non-Causal Filters) in https://sites.google.com/site/pfeiferecon/Pfeifer_2013_Observation_Equations.pdf