Abstract
This article considers a multivariate system of fractionally integrated time series and investigates the most appropriate way for estimating Impulse Response (IR) coefficients and their associated confidence intervals. The article extends the univariate analysis recently provided by Baillie and Kapetanios (2013 Baillie, R. T., Kapetanios, G. (2013). Estimation and inference for impulse response functions form univariate strongly persistent processes. Econometrics Journal 16:373–399.
[CrossRef], [Web of Science ®], [Google Scholar]
), and uses a semiparametric, time domain estimator, based on a vector autoregression (VAR) approximation. Results are also derived for the orthogonalized estimated IRs which are generally more practically relevant. Simulation evidence strongly indicates the desirability of applying the Kilian small sample bias correction, which is found to improve the coverage accuracy of confidence intervals for IRs. The most appropriate order of the VAR turns out to be relevant for the lag length of the IR being estimated.
[CrossRef], [Web of Science ®], [Google Scholar]
), and uses a semiparametric, time domain estimator, based on a vector autoregression (VAR) approximation. Results are also derived for the orthogonalized estimated IRs which are generally more practically relevant. Simulation evidence strongly indicates the desirability of applying the Kilian small sample bias correction, which is found to improve the coverage accuracy of confidence intervals for IRs. The most appropriate order of the VAR turns out to be relevant for the lag length of the IR being estimated.
| Original language | English |
|---|---|
| Pages (from-to) | 60-84 |
| Journal | ECONOMETRIC REVIEWS |
| Volume | 36 |
| Issue number | 1-3 |
| DOIs | |
| Publication status | Published - 16 Mar 2017 |