Impulse response analysis for structural dynamic models with nonlinear regressors

Sílvia Gonçalves, Ana María Herrera, Lutz Kilian, Elena Pesavento

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We study the construction of nonlinear impulse responses in linear structural dynamic models that include nonlinearly transformed regressors. We derive the closed-form solution for the population impulse responses to a given shock and propose a control function approach to estimating these responses without taking a stand on how the remainder of the model is identified. Our plug-in estimator dispenses with the need for simulations and, unlike conventional local projection (LP) estimators, is consistent. A modified LP estimator is shown to be consistent in special cases, but less accurate in finite samples than the plug-in estimator.

Original languageEnglish
Pages (from-to)107-130
Number of pages24
JournalJournal of Econometrics
Volume225
Issue number1
DOIs
StatePublished - Nov 2021

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

  • Block recursive model
  • Censored regressor
  • Control function
  • Local projection
  • Monte Carlo integration
  • Nonlinear responses
  • Nonlinear transformation
  • Partial identification
  • Structural model

ASJC Scopus subject areas

  • Economics and Econometrics

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