Ehrmann-Ellison-Valla(2003) Regime-dependent IRF's

[TomDoan]

This is a rough implementation of Ehrmann, Ellison, Valla (2003), "Regime-dependent impulse response functions in a Markov-switching vector autoregression model", Economics Letters, Vol. 78, pp. 295-299. The data set is a reconstruction rather than the author's original data set (from their working paper). This does MCMC rather than bootstrapping for the generation of error bands for the IRF's. It does two sets of impulse responses at each kept draw, and "interleaves" them so there are six "shocks" for use in @MCGRAPHIRF, in order the first in regime1, first in regime 2, second in regime 1, etc.

This model is estimated several different ways as part of the Structural Breaks and Switching Models workbook:
http://www.estima.com/forum/viewtopic.php?f=24&t=1185.

eev_mcmc.rpf

Estimation with MCMC including IRF's

(6.56 KiB) Downloaded 474 times

eev_reconstructed.rat

Data set (reconstructed)

(21.5 KiB) Downloaded 336 times

[stemonmat]

Dear Tom, I have a problem running the code. I get the following error

## SR3. Tried to Use Series Number 12007784, Only 6 Are Available
The Error Occurred At Location 531, Line 72 of MSSYSREGRESSION

when I execute

@mssysregression(states=2,switch=ch)
# logcutil logcpi logpoil
# constant logcutil{1 to 3} logcpi{1 to 3} logpoil{1 to 3}

[moderator]

It looks like you are trying to run that with version 8.0? You'll need version 8.1 to run that example.

I believe you're at Banca d'Italia, which has a current update subscription and thus has version 8.1. If you can get whoever is in charge of the RATS license there to get you updated to version 8.1, that should eliminate the problem.

Regards,
Tom Maycock

[nazif]

Dear Tom,
Is it possible to produce regime transition probabilities and also regime properties similar to original Ox code of Ehrmann?
and I come to another question when I am plotting irfs. Could you please explain to me what are irf(3,8) and irf(4,8) in the four-variable system? for example is irf(3,8) the response of the third variable to the fourth shock in the second regime?
Thanks
Nazif

[TomDoan]

Dear Tom,
Is it possible to produce regime transition probabilities and also regime properties similar to original Ox code of Ehrmann?

Sure. You have to save the draws for the P matrices and analyze them.

and I come to another question when I am plotting irfs. Could you please explain to me what are irf(3,8) and irf(4,8) in the four-variable system? for example is irf(3,8) the response of the third variable to the fourth shock in the second regime?

The i in IRF(i,j) is the variable whose response is being computed. The shocks are interleaved, so j=1 and j=2 are for the first shock in the two regimes; j=3 and j=4 for the second shock, etc. So j=8 is the 4th shock, 2nd regime.