Do state-dependent local projections asymptotically recover the population responses of macroeconomic aggregates to structural shocks? The answer to this question depends on how the state of the economy is determined and on the magnitude of the …
This paper studies inference in cointegrating regessions and vector error correction (VEC) models when the cointegrating errors are a nearly integrated process with a low signal-to-noise-ratio. This combination of persistent, yet low variance error …
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 …
This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and …
This article clarifies the empirical source of the debate on the effect of technology shocks on hours worked. We find that the contrasting conclusions from levels and differenced vector autoregression specifications, documented in the literature, can …
A number of tests have been suggested for the test of the null of no cointegration. Under this null, correlations are spurious in the sense of Granger and Newbold (1974) and Phillips (1986). We examine a set of models local to the null of no …
This paper provides a comprehensive comparison of existing methods for constructing confidence bands for univariate impulse response functions in the presence of high persistence. Monte Carlo results show that the methods proposed in Kilian [1999. …
This article studies the asymptotic distribution of five residuals‐based tests for the null of no‐cointegration under a local alternative when the tests are computed using both ordinary least squares (OLS) and generalized least squares …
Existing methods for constructing confidence bands for multivariate impulse response functions may have poor coverage at long lead times when variables are highly persistent. The goal of this paper is to propose a simple method that is not pointwise …
Theory often specifies a particular cointegrating vector among integrated variables, and testing for a unit root in the known cointegrating vector is often required. Although it is common to simply use a univariate test for a unit root for this test, …