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Weird impulse responses to MP shock
Posted:
Fri Apr 08, 2016 5:44 amby monsoon
Attached is a simulated model. My question is regarding the shapes of impulse response of monetary policy shock. Although they have the desired signs, impulses lack the usual hump shape, are magnitudinally small and persist only for a quarter or may be a little more for some variables. However, monetary policy shock explains the bulk of the variation in most variables. Is that a weird result? How can we improve it? Any help is highly appreciated.
Many thanks.
Re: Weird impulse responses to MP shock
Posted:
Fri Apr 08, 2016 7:47 amby jpfeifer
That is hard to tell. You as the model builder are the only one who knows the features you put in. You did not even tell us which variable is the monetary policy shock.
Re: Weird impulse responses to MP shock
Posted:
Fri Apr 08, 2016 7:56 amby monsoon
Sorry for that. MP shock is e_zi.
Re: Weird impulse responses to MP shock
Posted:
Fri Apr 08, 2016 8:01 amby jpfeifer
Then figure out why it leads to IRFs that are in the hundreds, i.e. several magnitudes bigger than the other shocks. My guess is that you messed up the scaling (multiplication by 100)
Re: Weird impulse responses to MP shock
Posted:
Fri Apr 08, 2016 8:23 amby monsoon
point taken professor.
Thanks and
Regards