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Estimating structural macroeconomic shocks through long-run recursive restrictions on vector autoregressive models: the problem of identification

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Author Info
Mark P. Taylor (Department of Economics, University of Warwick, and Centre for Economic Policy Research, UK)

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Abstract

We demonstrate that a popular method of estimating underlying structural macroeconomic shocks and their impulse-response functions through recursive long-run structural restrictions on a vector autoregressive representation is not uniquely identified. We show, however, that it may be possible to infer additional qualitative restrictions to achieve identification. We illustrate with two applied examples, corresponding to a simple aggregate supply-aggregate demand framework for the USA and to a stochastic Mundell-Fleming-Dornbusch framework for the USA and Japan. The second example also illustrates how over-identifying restrictions of the underlying framework may be examined informally. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.247
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 9 (2004)
Issue (Month): 3 ()
Pages: 229-244
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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:3:p:229-244

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May. [Downloadable!] (restricted)
  2. repec:cup:macdyn:v:5:y:2001:i:4:p:466-81 is not listed on IDEAS
  3. Bayoumi, Tamim & Taylor, Mark P, 1992. "Macroeconomic Shocks, the ERM, and Tri-Polarity," CEPR Discussion Papers 711, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Clarida, Richard & Galí, Jordi, 1994. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," CEPR Discussion Papers 951, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Kilian, Lutz, 2001. "Impulse Response Analysis in Vector Autoregressions with Unknown Lag Order," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(3), pages 161-79, April.
  6. Ahmed, Shaghil & Ickes, Barry W. & Ping Wang & Byung Sam Yoo, 1993. "International Business Cycles," American Economic Review, American Economic Association, vol. 83(3), pages 335-59, June. [Downloadable!] (restricted)
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  7. Lothian, James R. & Taylor, Mark P., 1997. "Real exchange rate behavior," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 945-954, December. [Downloadable!] (restricted)
  8. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation, Yale University. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ossama Mikhail, 2005. "What Happens After A Technology Shock? A Bayesian Perspective," Macroeconomics 0510016, EconWPA. [Downloadable!]
  2. Richard H. Clarida & Mark P. Taylor, 2003. "Nonlinear Permanent - Temporary Decompositions in Macroeconomics and Finance," Economic Journal, Royal Economic Society, vol. 113(486), pages C125-C139, March. [Downloadable!] (restricted)
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  3. Alexius, Annika & Post, Erik, 2005. "Exchange Rates and Asymmetric Shocks in Small Open Economies," Working Paper Series 2005:10, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
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