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Underidentified SVAR models: A framework for combining short and long-run restrictions with sign-restrictions

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  • Andrew Binning

    ()
    (Norges Bank (Central Bank of Norway))

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    Abstract

    I describe a new method for imposing zero restrictions (both short and long-run) in combination with conventional sign-restrictions. In particular I extend the Rubio-Ramrez et al.(2010) algorithm for applying short and long-run restrictions for exactly identified models to models that are underidentified. In turn this can be thought of as a unifying framework for short-run, long-run and sign restrictions. I demonstrate my algorithm with two examples. In the first example I estimate a VAR model using the Smets & Wouters (2007) dataset and impose sign and zero restrictions based on the impulse responses from their DSGE model. In the second example I estimate a BVAR model using the Mountford & Uhlig (2009) data set and impose the same sign and zero restrictions they use to identify an anticipated government revenue shock.

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    File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2013/WP-201314/
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    Bibliographic Info

    Paper provided by Norges Bank in its series Working Paper with number 2013/14.

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    Length: 28 pages
    Date of creation: 10 Jun 2013
    Date of revision:
    Handle: RePEc:bno:worpap:2013_14

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    Related research

    Keywords: SVAR; Identification; Impulse responses; Short-run restrictions; Long-run restrictions; Sign restrictions;

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    Cited by:
    1. Arias, Jonas E. & Rubio-Ramírez, Juan Francisco & Waggoner, Daniel F, 2014. "Inference Based on SVAR Identified with Sign and Zero Restrictions: Theory and Applications," CEPR Discussion Papers 9796, C.E.P.R. Discussion Papers.
    2. Jonas E. Arias & Juan Rubio-Ramirez & Daniel F. Waggoner, 2013. "Inference Based on SVARs Identied with Sign and Zero Restrictions: Theory and Applications," Working Papers 2013-24, FEDEA.
    3. Villarreal, Francisco G., 2014. "Monetary Policy and Inequality in Mexico," MPRA Paper 57074, University Library of Munich, Germany.

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