Comparing Impulse Response Estimation: VAR, Local Projections, and Bayesian Network VAR Models

Comparing Impulse Response Estimation: VAR, Local Projections, and Bayesian Network VAR Models | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Comparing Impulse Response Estimation: VAR, Local Projections, and Bayesian Network VAR Models Pegah Mahdavi, Mohammad Ali Ehsani, Daniel Felix Ahelegbey This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6922059/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 3 You are reading this latest preprint version Abstract This paper examines the estimation of impulse responses in macroeconomic analysis using Vector Autoregression (VAR), Local Projections (LP), and Bayesian Network Vector Autoregression (BNVAR) models. Impulse response estimation is crucial in evaluating the effects of economic shocks on macroeconomic variables. While traditional VAR and LP models have been extensively used, the BNVAR framework introduces a novel approach by incorporating network structures to capture variable interdependencies. We conduct extensive bootstrap simulations on a well-known macroeconomic dataset, constructing various data-generating processes (DGPs) to compare the performance of these methods. Our results show that the BNVAR model provides more efficient pointwise impulse response estimates and better identifies causal dependencies than conventional VAR and LP methods. Moreover, we compare BNVAR with Granger causality and find that BNVAR offers improved accuracy in determining the relationships among economic variables. vector auto-regressive Local Projection Impulse Response Bayesian Network vector auto-regressive Full Text Cite Share Download PDF Status: Under Review Version 1 posted Reviewers invited by journal 26 Jun, 2025 Editor assigned by journal 20 Jun, 2025 First submitted to journal 19 Jun, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6922059","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":477070518,"identity":"2ffb232a-db1d-465e-ba39-c6b842c86119","order_by":0,"name":"Pegah Mahdavi","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABDklEQVRIie2PMUsDMRiGUwreknNW6o84l5Ticf0hLgmBc4mCdLTgiUOXw70/Qrgp81cCvSUY3AI32FJwchA6KmKsU4dcOwrmgUB4eR/eBKFA4I/SdYciQEh94tTdO3ewtwL4JP9Riv0VhFO1SVqVfjR5Xl+L7Oqw1qdwJEz2OFFuZZye+5RBqUe9qeSjYy0SSHTDpWZOmeeXhUdJrKC9WHZZBTkFVjacgFM6hfIrL2/8I5a3rDKvFGZfT5yY5Q7FRnO3olhlOcwKDBmxO1YGpTg4i2XNpnYFCmFOiXUrtOUv/aheNbG8YQ+G3a8RzobEXCwX7+PU/zCEk62AbZrUU/9VosVWMGwpBwKBwD/lG/BOb4rhCRa4AAAAAElFTkSuQmCC","orcid":"https://orcid.org/0000-0003-3058-7802","institution":"University of Mazandaran Faculty of Economics and Administrative Science","correspondingAuthor":true,"prefix":"","firstName":"Pegah","middleName":"","lastName":"Mahdavi","suffix":""},{"id":477070519,"identity":"fd9db3ac-cd32-4b61-b2b6-0bd48d10c0c9","order_by":1,"name":"Mohammad Ali Ehsani","email":"","orcid":"","institution":"University of Mazandaran Faculty of Economics and Administrative Science","correspondingAuthor":false,"prefix":"","firstName":"Mohammad","middleName":"Ali","lastName":"Ehsani","suffix":""},{"id":477070520,"identity":"dd7a5e5f-a4ae-44c7-904d-3149225289e8","order_by":2,"name":"Daniel Felix Ahelegbey","email":"","orcid":"","institution":"University of Essex","correspondingAuthor":false,"prefix":"","firstName":"Daniel","middleName":"Felix","lastName":"Ahelegbey","suffix":""}],"badges":[],"createdAt":"2025-06-18 10:27:33","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6922059/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6922059/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":85783801,"identity":"f4a51d16-3c2e-4640-ab93-6b8c0799b918","added_by":"auto","created_at":"2025-07-01 15:42:39","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":573319,"visible":true,"origin":"","legend":"","description":"","filename":"ComparingImpulseResponseEstimation2.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6922059/v1_covered_053b0899-5d54-41fb-97a2-7ceb28760680.pdf"}],"financialInterests":"","formattedTitle":"Comparing Impulse Response Estimation: VAR, Local Projections, and Bayesian Network VAR Models","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"journal-of-economic-structures","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"jecs","sideBox":"Learn more about [Journal of Economic Structures](http://journalofeconomicstructures.springeropen.com)","snPcode":"","submissionUrl":"https://www.editorialmanager.com/jecs/default.aspx","title":"Journal of Economic Structures","twitterHandle":"@SpringerOpen","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"em","reportingPortfolio":"BMC/SO AJ","inReviewEnabled":true,"inReviewRevisionsEnabled":true},"keywords":"vector auto-regressive, Local Projection, Impulse Response, Bayesian Network vector auto-regressive","lastPublishedDoi":"10.21203/rs.3.rs-6922059/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6922059/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"This paper examines the estimation of impulse responses in macroeconomic analysis using Vector Autoregression (VAR), Local Projections (LP), and Bayesian Network Vector Autoregression (BNVAR) models. 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