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Are spectral estimators useful for long-run restrictions in SVARs?

Listed author(s):
  • Mertens, Elmar

No, not really. In response to concerns about the reliability of SVARs, one proposal has been to combine OLS estimates of a VAR with non-parametric estimates of the spectral density. But as shown here, spectral estimators are no panacea for implementing long-run restrictions. They can suffer from small sample and misspecification biases just as VARs do. As a novelty, this paper uses a spectral factorization to ensure a correct representation of the data's variance. But this cannot overcome the basic small sample issues, which arise when trying to estimate long-run properties from relatively short samples of time-series data.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165188912001431
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 12 ()
Pages: 1831-1844

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:12:p:1831-1844
DOI: 10.1016/j.jedc.2012.06.007
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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