Extract Structural Shocks from the FAVAR

[sschenatntu]

Hi!

I wonder if it is possible to extract structural shocks from the code bbegibbs.rpf? (Bernanke et al (2005)'s FAVAR model)

Thanks in advance!

SS

[TomDoan]

What do you mean by the "structural shocks"?

[sschenatntu]

Tom:

Using Bernanke et al. (2005) as an example, in Figure IV of Page 410, they plot the impulse response functions in response to a monetary policy shock. I wonder if I can obtain the series of the monetary policy shock, for example, as a linear combination of regression residuals from the code bbegibbs.rpf?

Thanks a lot!

[TomDoan]

The problem is that because this is estimated by Gibbs sampling, the series of residuals changes with each draw. (Because the FFR is treated as an observable factor, the shocks are just residuals).