Estimating impulse response functions when the shock series is observed

摘要

We compare the finite sample performance of a variety of consistent approaches to estimating impulse response functions (IRFs) in a linear setup when the shock of interest is observed. Although there is no uniformly superior approach, iterated approaches turn out to perform well in terms of root mean squared error (RMSE) in diverse environments and sample sizes. For smaller sample sizes, the inclusion of all 'relevant' variables is not always desirable. (C) 2019 Elsevier B.V. All rights reserved.