Impact Factors

In this paper we discuss sensitivity of forecasts with respect to the information set
considered in prediction; a sensitivity measure called impact factor,IF,is defined. This notion
is specialized to the case of VAR processes integrated of order 0,1 and 2. For stationary VARs this measure corresponds to the sum of the impulse response coefficients. For integrated VAR systems,the IF has a direct interpretation in terms of long-run forecasts. Various applications
of this concept are reviewed; they include questions of policy effectiveness and of forecast
uncertainty due to data revisions. A unified approach to inference on the IF is given,showing
under what circumstances standard asymptotic inference can be conducted also in systems
integrated of order 1 and 2. It is shown how the results reported here can be used to calculate
similar sensitivity measures for models with a simultaneity structure.