Working paper/research report

Publication year: 2016

URL: http://hdl.handle.net/10419/130218

Title of series: DIW Discussion Papers

Number in series: 1564

Abstract: 

This paper proposes a new non-parametric method of constructing joint confidence bands for impulse response functions of vector autoregressive models. The estimation uncertainty is captured by means of bootstrapping and the highest density region (HDR) approach is used to construct the bands. A Monte Carlo comparison of the HDR bands with existing alternatives shows that the former are competitive with the bootstrap-based Bonferroni and Wald confidence regions. The relative tightness of the HDR bands matched with their good coverage properties makes them attractive for applications. An application to corporate bond spreads for Germany highlights the potential for empirical work.

Harvard Citation style: Lütkepohl, H., Staszewska-Bystrova, A. and Winker, P. (2016) Calculating joint confidence bands for impulse response functions using highest density regions. (DIW Discussion Papers, 1564). Berlin: Deutsches Institut für Wirtschaftsforschung (DIW). http://hdl.handle.net/10419/130218

APA Citation style: Lütkepohl, H., Staszewska-Bystrova, A., & Winker, P. (2016). Calculating joint confidence bands for impulse response functions using highest density regions. (DIW Discussion Papers, 1564). Deutsches Institut für Wirtschaftsforschung (DIW). http://hdl.handle.net/10419/130218