Identifying VARs through Heterogeneity: An Application to Bank Runs
AbstractWe propose to incorporate cross-sectional heterogeneity into structural VARs. Heterogeneity provides an additional dimension along which one can identify structural shocks and perform hypothesis tests. We provide an application to bank runs, based on microeconomic deposit market data. We impose identification restrictions both in the cross-section (across insured and non-insured banks) and across variables (as in macro SVARs). We thus (i) identify bank runs, (ii) quantify the contribution of competing theories, and, (iii) evaluate policies such as deposit insurance. The application suggests substantial promise for the approach and has strong policy implications.
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Bibliographic InfoPaper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 244.
Length: 49 pages
Date of creation: 01 Jul 2010
Date of revision:
Identification; SVAR; panel-VAR; Heterogeneity; Bank run;
Find related papers by JEL classification:
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-10 (All new papers)
- NEP-BAN-2010-07-10 (Banking)
- NEP-CBA-2010-07-10 (Central Banking)
- NEP-ECM-2010-07-10 (Econometrics)
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