(2017) to get closed-form solutions for the paths of conditional moments of endogenous variables, the GIRF
. We first describe how we calculate a GIRF
and then how we use the GIRF
to compare the model against the data.
Another way to examine forward guidance is with generalized impulse response functions (GIRFs
) following Koop, Pesaran, and Potter (1996).
It follows that GIRF
is difference between the forecasted path of variable in an economy without shock and forecasted path of the same variable in an economy hit by a shock.
Section A Pitfall of the GIRF
analytically demonstrates why the GIRF
actually can be considered extreme in perspective of its identification method.
thus, the GIRF
will be applied in the following analysis and Figure 7 illustrates the results.
Memorial contributions may be made to GIRF
(Gastro-Intestinal Research Foundation) 70 East Lake St.
Hence, this paper adopts generalized impulse response function (GIRF
where [GIRF.sub.q] is the GIRF
of the real exchange rate; [eta] is the forecasting horizon; [v.sub.t] is the shock to the process at time t; [[omega].sub.t-1] is the history of the variable, which is the set of the historical data of [q.sub.t], as suggested by Koop, Pesaran, and Potter (1996); and E[*] is the conditional expectation operator.
For each regime, the figures represent the ratio between the GIRF
for shocks of magnitude two standard errors over the GIRF
for unit shocks; Figure 3 is for negative shocks and Figure 4 for positive shocks.
Figure 2 display GIRF
of each variable to a positive one unit standard deviation shock to oil prices.
(10.) We have also employed generalized impulse response functions and the results are basically similar to those reported here except that interest rates have even less impact on the trade deficit in the GIRF
case than they do in our reported results in the text.
(14) Koop, Pesaran, and Potter (1996) introduced the generalized impulse response function (GIRF
) for nonlinear models.