Hi everyone, I know IRF matching is to minimize the distance between the model IRFs and empirical IRFs. But model IRFs are driven by exogenous shock while empirical IRFs are driven by shocks to a variable. The shocks are different. How do I match them? Is the technology shock in model equivalent…

How are model IRFs matched with VAR IRFs?

jpfeifer May 24, 2023, 4:39pm 12

See e.g.

and the reference therein. And yes, it is important that the assumptions in the model and the VAR match.