How to compute confidence bands for IRF's within in vgx framework?

Hi,

I have estimated a VAR model using vgxvarx, and subsequently I used vgxproc to compute impulse responses. I would like to add confidence intervals to my impulse responses, and I wonder if one can do that easily within the vgx-framework. Of course, I could compute the confidence bands by manually typing in appropriate formulas from standard textbooks on VAR models, but does vgx offer a more easy and faster alternative to this procedure?

Thanks!

Best,

Esben Vibel

Answer 1

[Hang Qian]

Hi Esben,

I am not aware of an easy way to compute the confidence intervals of the impulse-responses using vgx functionalities. Try one of the following:

i) use the estimated innovations process returned by the last output argument of vgxvarx, and conduct the residual bootstrap to simulate multiple paths of impulse-responses.

ii) use the estimated standard errors of estimated parameters (the second output argument of vgxvarx) to build multiple VAR spec, and then use the parametric bootstrap for the confidence intervals.

iii) use the (somewhat cumbersome) analytic formulae of the estimated impulse-response covariance matrix to compute the asymptotic confidence intervals.

I apologize for the inconvenience.