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An information-theoretic extension to structural VAR modelling

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  • Nikolaus A. Siegfried

    (Hamburg University)

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 and Quah (1989) and Christiano et al. (1999), the new estimator is demonstrated and contrasted with current modelling techniques.

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File URL: http://128.118.178.162/eps/em/papers/0203/0203005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0203005.

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Length: 37 pages
Date of creation: 08 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpem:0203005

Note: Type of Document - Acrobat PDF; prepared on Linux; to print on A4 paper; pages: 37; figures: included. Very preliminary. Comments welcome!
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Web page: http://128.118.178.162

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

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  2. Boschen, John F & Mills, Leonard O, 1995. "The Relation between Narrative and Money Market Indicators of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 24-44, January.
  3. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
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  17. 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. Markku Lanne & Helmut Luetkepohl, 2005. "Structural Vector Autoregressions with Nonnormal Residuals," Economics Working Papers ECO2005/25, European University Institute.

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