Asymmetric generalized impulse responses with an application in finance

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    51 Citations (Scopus)

    Abstract

    Since the seminal work by Sims (1980), the impulse response functions are regularly applied to capture the propagation mechanism of a shock across time. This paper suggests a new approach for allowing asymmetry in the impulse response functions. This is an issue that has been neglected in the existing literature on the estimation of impulses. In the current paper it is shown how the underlying variables can be transformed into cumulative positive and negative changes in order to estimate the impulses to an asymmetric innovation. An application is provided to demonstrate how the propagation mechanism of an asymmetric impulse operates.

    Original languageEnglish
    Pages (from-to)18-22
    Number of pages5
    JournalEconomic Modelling
    Volume36
    DOIs
    Publication statusPublished - Jan 1 2014

    Keywords

    • Asymmetric impulses
    • C32
    • H21
    • Stock market
    • VAR modeling

    ASJC Scopus subject areas

    • Economics and Econometrics

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