Pass-Through Impulse Response Functions (PT-IRFs)

Impulse response functions (IRFs) offer little insight regarding the channels by which a shock propagates through a dynamical system. I formulate the concept of a pass-through impulse response function (PT-IRF), which measures the passage of a structural shock through specific sets of variables in a given system. I demonstrate the applicability of PT-IRFs by measuring the strength of the effect of a monetary policy shock on unemployment through the credit channel of monetary transmission using a structural vector autoregression