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An information-theoretic extension to structural VAR modelling

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Author Info
Nikolaus A. Siegfried ()

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Abstract

This paper discusses techniques for estimating structural vector autoregressions. Especially when monetary policy shocks are estimated, VAR residuals turn out to be leptokurtic. It is argued that this is no coincidence but follows directly from the properties of monetary policy decisions. The paper proceeds to suggest an independent components estimator (ICE) that works well with leptokurtic residuals. Furthermore, the ICE permits a closer link between theory and estimation because it avoids informal imposition of zero restrictions. Using the exercises by Blanchard & Quah (1989) and Christiano, Eichenbaum & Evans (1999), the new estimator is demonstrated and contrasted with current modelling techniques.

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Publisher Info
Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20203.

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Length: 37 pages
Date of creation: Mar 2002
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Handle: RePEc:ham:qmwops:20203

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Related research
Keywords: Keywords: Structural Vector Autoregressions; Information Theory; Monetary Transmission Mechanism;

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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    Other versions:
  2. Golan, Amos, 2002. "Information and Entropy Econometrics--Editor's View," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 1-15, March. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
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    Other versions:
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  21. Romer, Christina D. & Romer, David H., 1994. "Monetary policy matters," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 75-88, August. [Downloadable!] (restricted)
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