# Walk through for calculating impulse response function, given VAR equation & coefficients

Can someone walk me through how to manually calculate the IRF values that Eviews outputs for the effect of a nonfactorized one unit innovation.

I have my VAR equation and coefficients:

VAR Model - Substituted Coefficients:
===============================
MARKET_A = 1.38531644845*MARKET_A(-1) - 0.456533910287*MARKET_A(-2) + 0.0908884378218*MARKET_B(-1) - 0.0116001711851*MARKET_B(-2) - 0.0458678142475

MARKET_B = 0.0934164283416*MARKET_A(-1) - 0.0678660464848*MARKET_A(-2) + 1.34042022538*MARKET_B(-1) - 0.372260999882*MARKET_B(-2) + 0.0341759469926


The Eviews output for the effect of a nonfactorized one unit innovation from MARKET_A.

 Period MARKET_B    MARKET_A

1   0.000000    1.000000
2   0.093416    1.385316
3   0.186763    1.471058
4   0.258970    1.421328
5   0.310545    1.318772
6   0.346591    1.203253
7   0.371878    1.092721
8   0.389868    0.994217
9   0.402869    0.909562
10  0.412376    0.838231

Nonfactorized One Unit


To calculate period 2, I have tried plugging in the values in the equation i.e

• 0 for MARKET_B(-1),
• 0 for MARKET_B(-2)
• 1 for MARKET_A(-1)
• 0 for MARKET_A(-2)

but the output is not the same for the first period. Obviously, I'm missing something. Could someone point me in the right direction?