In this paper, the orthogonal impulse response functions (OIRFs) are studied in the non-standard but quite common case where the covariance of the error vector is not constant in time. The usual approach for taking such covariance behavior into account consists in applying the standard tools to sub-periods of the whole sample. We underline that such a practice may lead to severe upward bias. We propose a new approach intended to give what we argue to be a more accurate summary of the time-varying OIRFs. This consists in averaging the Cholesky decomposition of nonparametric covariance estimators. In addition, an index is developed to evaluate the heteroscedasticity effect on the OIRFs analysis. The asymptotic behavior of the proposed estimators is investigated.
|Title of host publication||Research Papers in Statistical Inference for Time Series and Related Models|
|Subtitle of host publication||Essays in Honor of Masanobu Taniguchi|
|Number of pages||25|
|State||Published - 1 Jan 2023|