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Modern Econometric Approaches: Application of The ARW Algorithm in Shock Identification

Author

Listed:
  • Ivan Todorov

    (University of National and World Economy, Bulgaria)

Abstract

Part of the relevance of economic theory is the validation of empirical results and their dissemination. The reliability problems encountered in empirical analysis are often due to the endogeneity of macroeconomic variables. Since the seminal work of Sims (1980), structural vector autoregressives (SVARs) have supplanted large-scale macroeconometric models, but we are unable to interpret how the endogenous variables affect each other if the residuals are not orthogonal. A huge recent step in the development of econometrics is the identification scheme for checking all possible permutations of SVAR models, but retaining only those that have "economically sensible" impulse responses.

Suggested Citation

  • Ivan Todorov, 2022. "Modern Econometric Approaches: Application of The ARW Algorithm in Shock Identification," Scientific Conference of the Department of General Economic Theory, University of Economics - Varna, issue 1, pages 55-60.
    • Handle: RePEc:vrn:oitcon:y:2022:i:1:p:55-60
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    More about this item

    Keywords

    Eviews; Sign Restrictions; Structural Vector Autoregression; Zero Restrictions;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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