Fig. 2: Impulse response function (response to Cholesky 1-sd (d.f. adjusted) innovations).
From: Monetary policy transmission in India under the base rate and MCLR regimes: a comparative study
a Response of walrf to walrf innovations. b Response of walrf to wacr innovations. c Response of walrf to RGDP innovations. d Response of walrf to INF innovations. Note: (1) Data are seasonally adjusted. (2) The shocks in the VAR model are identified by using orthogonal impulse response (OIR). The basic idea is to decompose the variance-covariance matrix so that ∑ = PP′, where P is a lower triangular matrix with positive diagonal elements, which is often obtained by a Choleski decomposition. In our analysis, we have used the Choleski decomposition.
