Inoue, Atsushi; Rossi, Barbara - In: Quantitative Economics 12 (2021) 4, pp. 1085-1138
We propose a new approach to analyze economic shocks. Our new procedure identifies economic shocks as exogenous shifts in a function; hence, we call them "functional shocks." We show how to identify such shocks and how to trace their effects in the economy via VARs using "VARs with functional...