The structural vector autoregression (SVAR) has become a central tool for research in empirical macroeconomics. Because the vast majority of these models are exactly identified, researchers have traditionally relied upon the informal use of prior information to compare alternative specifications. This paper surveys some of the structural dynamic restrictions used to evaluate SVARs. I provide a method for constructing prior distributions that incorporates this information on impulse responses. Based upon these Impulse Response Priors (IRPs) I employ a formal Bayesian model selection procedure for comparing SVAR specifications. I use this procedure to compare several alternative, six variable SVAR models of the interaction of real and monetary sectors of the U.S. economy. I make these comparisons under a variety of assumptions regarding the nature of the money supply rule, and lag length. Emprically, I find strong evidence in favor of interpreting shocks to the federal funds rate as monetary policy shocks, as opposed to shocks to nonborrowed reserves. The most favored identification is one in which monetary policy reacts to contemporaneous movements in real variables and the price level. There is less evidence that monetary policy reacts as quickly to fluctuations in money demand.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by EconWPA in its series Econometrics with number
9808001.
Length: 35 pages Date of creation: 28 Aug 1998 Date of revision: Handle: RePEc:wpa:wuwpem:9808001
Note: Type of Document - PDF; prepared on IBM PC - OS/2-LaTeX2e; to print on HP/PostScript/etc; pages: 35; figures: included Contact details of provider: Web page: http://129.3.20.41
For technical questions regarding this item, or to correct its listing, contact: (EconWPA).
Cited by: (explanations, 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.)
Marco Del Negro & Frank Schorfheide, 2004.
"Priors from General Equilibrium Models for VARS,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
[Downloadable!] (restricted)