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An information-theoretic extension to structural VAR modelling

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  • 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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Bibliographic 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
Date of revision:
Handle: RePEc:ham:qmwops:20203

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

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  3. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Working Papers 2966, National Bureau of Economic Research, Inc.
  4. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," International Finance Discussion Papers 462, Board of Governors of the Federal Reserve System (U.S.).
  5. P.J.G. Vlaar & H. Schuberth, 1999. "Monetary Transmission and Controllability of Money in Europe: aStructural Vector Error Correction Approach," DNB Staff Reports (discontinued) 36, Netherlands Central Bank.
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  7. Boswijk, H. Peter & Lucas, Andre, 2002. "Semi-nonparametric cointegration testing," Journal of Econometrics, Elsevier, vol. 108(2), pages 253-280, June.
  8. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
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  16. Glenn D. Rudebusch, 1996. "Do measures of monetary policy in a VAR make sense?," Working Papers in Applied Economic Theory 96-05, Federal Reserve Bank of San Francisco.
  17. Uhlig, H.F.H.V.S., 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," Discussion Paper 1999-28, Tilburg University, Center for Economic Research.
  18. Choi, Woon Gyu, 1999. "Asymmetric Monetary Effects on Interest Rates across Monetary Policy Stances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 386-416, August.
  19. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.).
  20. Aparicio F. M. & Escribano A., 1998. "Information-Theoretic Analysis of Serial Dependence and Cointegration," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(3), pages 1-24, October.
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  23. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  24. Juselius, Katarina, 1998. "A Structured VAR for Denmark under Changing Monetary Regimes," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 400-411, October.
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Cited by:
  1. Lanne, Markku & Lütkepohl, Helmut, 2010. "Structural Vector Autoregressions With Nonnormal Residuals," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(1), pages 159-168.

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