A Guide to Autoregressive Distributed Lag Models for Impulse Response Estimations

We provide a guide to using autoregressive distributed lag models for impulse response estimations with an identified structural shock or an external instrument for the shock. We illustrate how specifications widely used in practice can lead to inconsistent and inefficient estimators. We further rev...

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Bibliographic Details
Published in:Oxford bulletin of economics and statistics 2022-10, Vol.84 (5), p.1101-1122
Main Authors: Baek, ChaeWon, Lee, Byoungchan
Format: Article
Language:English
Subjects:
Time series
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Summary:We provide a guide to using autoregressive distributed lag models for impulse response estimations with an identified structural shock or an external instrument for the shock. We illustrate how specifications widely used in practice can lead to inconsistent and inefficient estimators. We further review empirical results from previous papers and show that some results appear to be statistical artefacts. We propose a simple method to avoid such a false conclusion from biases or large standard errors and obtain consistent and precise estimates.
ISSN:0305-9049
1468-0084
DOI:10.1111/obes.12494