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Long-run Identification in a Fractionally Integrated System

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  • Tschernig, Rolf

    ()

  • Weber, Enzo

    ()

  • Weigand, Roland

    ()

Abstract

We propose an extension of structural fractionally integrated vector autoregressive models that avoids certain undesirable effects for impulse responses if long-run identification restrictions are imposed. We derive its Granger representation, investigate the effects of long-run restrictions and clarify their relation to finite-horizon schemes. It is illustrated by asymptotic analysis and simulations that enforcing integer integration orders can have severe consequences for impulse responses. In a system of US real output and aggregate prices effects of structural shocks strongly depend on integration order specification. In the statistically preferred fractional model the long-run restricted shock has only very short-lasting influence on GDP.

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File URL: http://epub.uni-regensburg.de/16901/1/IdentSFVAR_DP447.pdf
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File URL: http://epub.uni-regensburg.de/16901/2/Eppendix_IdentSFVAR_DP447.pdf
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Bibliographic Info

Paper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 447.

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Date of creation: Sep 2010
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Handle: RePEc:bay:rdwiwi:16901

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Keywords: Long memory; structural VAR; misspecification; GDP; price level;

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Cited by:
  1. Søren Johansen & Morten Ørregaard Nielsen, 2012. "The role of initial values in nonstationary fractional time series models," Working Papers 1300, Queen's University, Department of Economics.
  2. Tschernig, Rolf & Weber, Enzo & Weigand, Roland, 2013. "Long- versus medium-run identification in fractionally integrated VAR models," University of Regensburg Working Papers in Business, Economics and Management Information Systems 476, University of Regensburg, Department of Economics.
  3. Lovcha, Yuliya & Pérez Laborda, Àlex, 2013. "Hours worked - Productivity puzzle: identification in fractional integration settings," Working Papers 2072/211796, Universitat Rovira i Virgili, Department of Economics.

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