InternalInstrument

InternalInstrument Identify IRFs using internal instruments.

This class identifies impulse responses in (S)VARs using the internal instruments method proposed by Plagborg-Moller and Wolf (2021).

Notes

  • IRFs are computed from Cholesky-orthogonalized shocks with respect to the selected instrument.
  • Shocks are normalized by the response of the normalisingVariable at normalisingHorizon.
  • The instrument can be specified as an integer (index) or character (variable name).
  • Defaults:
  • instrument = 1 (first variable)
  • normalisingHorizon = 0

Reference

  • Plagborg-Moller, M., & Wolf, C. K. (2021). “Local Projections and VARs Estimate the Same Impulse Responses.” Econometrica, 89(2), 955-980. [https://doi.org/10.3982/ecta17813]

See also IdentificationMethod, Recursive