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Long- versus medium-run identification in fractionally integrated VAR models

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  • Tschernig, Rolf
  • Weber, Enzo
  • Weigand, Roland

Abstract

We state that long-run restrictions that identify structural shocks in VAR models with unit roots lose their original interpretation if the fractional integration order of the affected variable is below one. For such fractionally integrated models we consider a medium-run approach that employs restrictions on variance contributions over finite horizons. We show for alternative identification schemes that letting the horizon tend to infinity is equivalent to imposing the restriction of Blanchard and Quah (1989) introduced for the unit-root case.

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  • Tschernig, Rolf & Weber, Enzo & Weigand, Roland, 2014. "Long- versus medium-run identification in fractionally integrated VAR models," Economics Letters, Elsevier, vol. 122(2), pages 299-302.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:299-302
    DOI: 10.1016/j.econlet.2013.12.005
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    Cited by:

    1. Tschernig, Rolf & Weber, Enzo & Weigand, Roland, 2014. "Long- versus medium-run identification in fractionally integrated VAR models," Economics Letters, Elsevier, vol. 122(2), pages 299-302.
    2. Contreras-Reyes, Javier E., 2022. "Rényi entropy and divergence for VARFIMA processes based on characteristic and impulse response functions," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    3. Salisu, Afees A. & Ndako, Umar B. & Adediran, Idris A. & Swaray, Raymond, 2020. "A fractional cointegration VAR analysis of Islamic stocks: A global perspective," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Structural vector autoregression; Long-run restriction; Finite-horizon identification; Fractional integration; Impulse response function;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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