STOCKPRICE, CPI,OUTPUT AND INTEREST. The equation above checks the effect at time t=0,1,…of a unit shock to variables at time 0. Iterate the procedures above until = 0, which means the shock disappear at time t. An impulse response graph (Appendix 20) is obtained by running impulse responses based on VAR with these four variables(5 lags). From the graph, it is indicated how long and to what degree that 1 unit shock at time 0 on one variable influence the other variable. The blue line shows the change…
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