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A Guide to Autoregressive Distributed Lag Models for Impulse Response Estimations

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  • ChaeWon Baek
  • Byoungchan Lee

Abstract

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.

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  • ChaeWon Baek & Byoungchan Lee, 2022. "A Guide to Autoregressive Distributed Lag Models for Impulse Response Estimations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(5), pages 1101-1122, October.
    • Handle: RePEc:bla:obuest:v:84:y:2022:i:5:p:1101-1122
    DOI: 10.1111/obes.12494
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