Research
Research
Estimation and Inference of Quantile Impulse Response Functions by Local Projections: with Applications to VaR Dynamics (with Heejoon Han and Ji Hyung Lee), Journal of Financial Econometrics, 2024, 22(1), 1-29
Abstract: This article investigates the estimation and inference of quantile impulse response functions. We propose a new estimation method using the idea of local projections by JordĂ (2005). We establish consistency and asymptotic normality of the estimator, thereby enabling asymptotic inference. We also consider the confidence interval construction based on the stationary bootstrap and prove its consistency. Confirmatory simulation results and empirical practices on value-at-risk dynamics are provided.
Quantile Impulse Response Analysis with Applications in Macroeconomics and Finance (with Ji Hyung Lee), In Essays in Honor of Joon Y. Park: Econometric Methodology in Empirical Applications, 2023, Advances in Econometrics Vol. 45, 99-131, Supplement
Abstract: This paper studies the dynamic responses of the conditional quantiles and their applications in macroeconomics and finance. We build a multi-equation autoregressive conditional quantile model and propose a new construction of quantile impulse response functions (QIRFs). The tool set of QIRFs provides detailed distributional evolution of an outcome variable to economic shocks. We show the left tail of economic activity is the most responsive to monetary policy and financial shocks. The impacts of the shocks on Growth-at-Risk (the 5% quantile of economic activity) during the global financial crisis are assessed. We also examine how the economy responds to a hypothetical financial distress scenario.