Impulse Response Functions for Self-Exciting Nonlinear Models
Michael T. Owyang,
Daniel Soques,
Neville Francis
Abstract:We calculate impulse response functions from regime-switching models where the driving variable can respond to the shock. Two methods used to estimate the impulse responses in these models are generalized impulse response functions and local projections. Local projections depend on the observed switches in the data, while generalized impulse response functions rely on correctly specifying regime process. Using Monte Carlos with different misspecifications, we determine under what conditions either method is pr… Show more
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