Impulse response analysis in nonlinear multivariate models

This paper presents a unified approach to impulse response analysis which can be used for both linear and nonlinear multivariate models. After discussing the advantages and disadvantages of traditional impulse response functions for nonlinear models, we introduce the concept of a generalized impulse response function which, we argue, is applicable to both linear and nonlinear models. We develop measures of shock persistence and asymmetric effects of shocks derived from the generalized impulse response function. We illustrate the use of these measures for a nonlinear bivariate model of US output and the unemployment rate.