Structural Volatility Impulse Response Function and Asymptotic Inference
2018
This paper traces contemporaneous effects of independent shocks on predicted future volatilities through time. The shocks are identified through time-varying heteroscedasticity. I obtain the explicit functions of volatility impulse responses for a structural system of simultaneity. The asymptotic distributions of the derived functions are also studied in analytical forms for statistical inference. The potential of this new framework is empirically illustrated in a structural system of the U.S. commodity and stock markets.
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