Dear all,
I have got an annual database with a short term interest rate in percent, a long term interest rate in percent and consumption expenditures, computed as annual growth in percent. I set up a SVAR in that order and I would like to run an impulse response function next. The IRF chart shows that a shock of the short term interest rate (impulse variable) causes the consumption expenditures (response variable) to reach a value of -1.5 after two years before converging back to zero.
What is the unit of the impulse variable and the response variable each ? Is my interpretation correct that the IRF usually uses one standard deviation of the impulse variable and that the consumption expenditures would be 1.5 percentage points lower in the second year? I would like to know the reaction of the response variable if the short term interest rates rises by 1 percentage point. How could I recalibrate the IRF or calculate the effect by hand ?
Best regards
George
I have got an annual database with a short term interest rate in percent, a long term interest rate in percent and consumption expenditures, computed as annual growth in percent. I set up a SVAR in that order and I would like to run an impulse response function next. The IRF chart shows that a shock of the short term interest rate (impulse variable) causes the consumption expenditures (response variable) to reach a value of -1.5 after two years before converging back to zero.
What is the unit of the impulse variable and the response variable each ? Is my interpretation correct that the IRF usually uses one standard deviation of the impulse variable and that the consumption expenditures would be 1.5 percentage points lower in the second year? I would like to know the reaction of the response variable if the short term interest rates rises by 1 percentage point. How could I recalibrate the IRF or calculate the effect by hand ?
Best regards
George
