Advanced Search
MyIDEAS: Login to save this paper or follow this series

Structural VARs, Deterministic and Stochastic Trends: Does Detrending Matter?

Contents:

Author Info

  • Varang Wiriyawit
  • Benjamin Wong

Abstract

We highlight how detrending within Structural Vector Autoregressions (SVAR) is directly linked to the shock identification. Consequences of trend misspecification are investigated using a prototypical Real Business Cycle model as the Data Generating Process. Decomposing the different sources of biases in the estimated impulse response functions, we find the biases arising directly from trend misspecification are not trivial when compared to other widely studied misspecifications. Our example also illustrates how misspecifying the trend can also distort impulse response functions of even the correctly detrended variable within the SVAR system.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2014-06/46_2014_wiriyawit_wong.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2014-46.

as in new window
Length: 32 pages
Date of creation: Jun 2014
Date of revision:
Handle: RePEc:een:camaaa:2014-46

Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Email:
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC

Related research

Keywords: Structural VAR; Identification; Detrending; Bias;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Pagan, A.R. & Pesaran, M. Hashem, 2008. "Econometric analysis of structural systems with permanent and transitory shocks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(10), pages 3376-3395, October.
  2. Susanto Basu & John Fernald & Miles Kimball, 2004. "Are technology improvements contractionary?," Working Paper Series, Federal Reserve Bank of Chicago WP-04-20, Federal Reserve Bank of Chicago.
  3. Fabio Canova & Filippo Ferroni, 2009. "Multiple filtering devices for the estimation of cyclical DSGE models," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1135, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2010.
  4. Christopher J. Erceg & Luca Guerrieri, 2004. "Can Long-Run Restrictions Identify Technology Shocks?," Computing in Economics and Finance 2004, Society for Computational Economics 3, Society for Computational Economics.
  5. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(8), pages 1379-1399, November.
  6. Leu, Shawn Chen-Yu, 2011. "A New Keynesian SVAR model of the Australian economy," Economic Modelling, Elsevier, Elsevier, vol. 28(1-2), pages 157-168, January.
  7. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  8. Federico Ravenna, 2005. "Vector Autoregressions and Reduced Form Representations of DSGE Models," 2005 Meeting Papers, Society for Economic Dynamics 841, Society for Economic Dynamics.
  9. Cover, James P. & Mallick, Sushanta K., 2012. "Identifying sources of macroeconomic and exchange rate fluctuations in the UK," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(6), pages 1627-1648.
  10. Kato, Ryuta Ray & Miyamoto, Hiroaki, 2013. "Fiscal stimulus and labor market dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 33-58.
  11. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Are structural VARs with long-run restrictions useful in developing business cycle theory?," Staff Report, Federal Reserve Bank of Minneapolis 364, Federal Reserve Bank of Minneapolis.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2014-46. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.