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Sign Restrictions in Structural Vector Autoregressions: A Critical Review

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  • Ren�e Fry
  • Adrian Pagan

Abstract

The paper provides a review of the estimation of structural vector autoregressions with sign restrictions. It is shown how sign restrictions solve the parametric identification problem present in structural systems but leaves the model identification problem unresolved. A market and a macro model are used to illustrate these points. Suggestions have been made on how to find a unique model. These are reviewed. An analysis is provided of whether one can recover the true impulse responses and what difficulties might arise when one wishes to use the impulse responses found with sign restrictions. (JEL C32, C51, E12)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.49.4.938
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 49 (2011)
Issue (Month): 4 (December)
Pages: 938-60

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Handle: RePEc:aea:jeclit:v:49:y:2011:i:4:p:938-60

Note: DOI: 10.1257/jel.49.4.938
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  1. > Econometrics > Time Series Models > VAR Models > Sign Restrictions
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