Variance decompositions
A) Trace out the responsiveness of the dependent variables in the VAR to shocks to each of the variables
B) Will always give the same conclusions as impulse responses
C) Trace out the responsiveness of the residuals in the VAR to shocks to each of the variables
D) Give the proportion of the movements in the dependent variables that are due to their own shocks versus shocks to other variables

Question

Quizplus · Accepted Answer

Variance decompositions provide the proportion of the forecast error variance of each variable that can be attributed to shocks to each variable in the VAR, including its own shocks and shocks to other variables.

Variance Decompositions