IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2102.04048.html
   My bibliography  Save this paper

A note on global identification in structural vector autoregressions

Author

Listed:
  • Emanuele Bacchiocchi
  • Toru Kitagawa

Abstract

In a landmark contribution to the structural vector autoregression (SVARs) literature, Rubio-Ramirez, Waggoner, and Zha (2010, `Structural Vector Autoregressions: Theory of Identification and Algorithms for Inference,' Review of Economic Studies) shows a necessary and sufficient condition for equality restrictions to globally identify the structural parameters of a SVAR. The simplest form of the necessary and sufficient condition shown in Theorem 7 of Rubio-Ramirez et al (2010) checks the number of zero restrictions and the ranks of particular matrices without requiring knowledge of the true value of the structural or reduced-form parameters. However, this note shows by counterexample that this condition is not sufficient for global identification. Analytical investigation of the counterexample clarifies why their sufficiency claim breaks down. The problem with the rank condition is that it allows for the possibility that restrictions are redundant, in the sense that one or more restrictions may be implied by other restrictions, in which case the implied restriction contains no identifying information. We derive a modified necessary and sufficient condition for SVAR global identification and clarify how it can be assessed in practice.

Suggested Citation

  • Emanuele Bacchiocchi & Toru Kitagawa, 2021. "A note on global identification in structural vector autoregressions," Papers 2102.04048, arXiv.org, revised Feb 2021.
  • Handle: RePEc:arx:papers:2102.04048
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2102.04048
    File Function: Latest version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Raffaella Giacomini & Toru Kitagawa & Matthew Read, 2021. "Identification and Inference Under Narrative Restrictions," Papers 2102.06456, arXiv.org.
    2. Juan Antolín-Díaz & Juan F. Rubio-Ramírez, 2018. "Narrative Sign Restrictions for SVARs," American Economic Review, American Economic Association, vol. 108(10), pages 2802-2829, October.
    3. Arias, Jonas E. & Rubio-Ramírez, Juan F. & Waggoner, Daniel F., 2021. "Inference in Bayesian Proxy-SVARs," Journal of Econometrics, Elsevier, vol. 225(1), pages 88-106.
    4. Juan F. Rubio-Ramírez & Daniel F. Waggoner & Tao Zha, 2010. "Structural Vector Autoregressions: Theory of Identification and Algorithms for Inference," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 665-696.
    5. Raffaella Giacomini & Toru Kitagawa, 2021. "Robust Bayesian Inference for Set‐Identified Models," Econometrica, Econometric Society, vol. 89(4), pages 1519-1556, July.
    6. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 79(5), pages 1146-1164, December.
    7. Rothenberg, Thomas J, 1971. "Identification in Parametric Models," Econometrica, Econometric Society, vol. 39(3), pages 577-591, May.
    8. Pooyan Amir‐Ahmadi & Thorsten Drautzburg, 2021. "Identification and inference with ranking restrictions," Quantitative Economics, Econometric Society, vol. 12(1), pages 1-39, January.
    9. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
    10. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
    11. Juan Antolin-Diaz & Juan F. Rubio-Ramirez, 2016. "Narrative Sign Restrictions for SVARs," FRB Atlanta Working Paper 2016-16, Federal Reserve Bank of Atlanta.
    12. Emanuele Bacchiocchi & Toru Kitagawa, 2020. "Locally- but not globally-identified SVARs," CeMMAP working papers CWP40/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthew Read, 2022. "Algorithms for inference in SVARs identified with sign and zero restrictions [Identification and inference with ranking restrictions]," The Econometrics Journal, Royal Economic Society, vol. 25(3), pages 699-718.
    2. Emanuele Bacchiocchi & Toru Kitagawa, 2020. "Locally- but not globally-identified SVARs," CeMMAP working papers CWP40/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Drautzburg, Thorsten & Wright, Jonathan H., 2023. "Refining set-identification in VARs through independence," Journal of Econometrics, Elsevier, vol. 235(2), pages 1827-1847.
    2. Raffaella Giacomini & Toru Kitagawa & Matthew Read, 2021. "Identification and Inference Under Narrative Restrictions," Papers 2102.06456, arXiv.org.
    3. Matthew Read, 2022. "Algorithms for inference in SVARs identified with sign and zero restrictions [Identification and inference with ranking restrictions]," The Econometrics Journal, Royal Economic Society, vol. 25(3), pages 699-718.
    4. Inoue, Atsushi & Kilian, Lutz, 2022. "Joint Bayesian inference about impulse responses in VAR models," Journal of Econometrics, Elsevier, vol. 231(2), pages 457-476.
    5. Ferreira, Leonardo N., 2022. "Forward guidance matters: Disentangling monetary policy shocks," Journal of Macroeconomics, Elsevier, vol. 73(C).
    6. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    7. Matthew Read, 2023. "Estimating the Effects of Monetary Policy in Australia Using Sign‐restricted Structural Vector Autoregressions," The Economic Record, The Economic Society of Australia, vol. 99(326), pages 329-358, September.
    8. Emanuele BACCHIOCCHI & Riccardo Jack LUCCHETTI, 2015. "Structure-Based SVAR Identification," Departmental Working Papers 2015-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    9. Atsushi Inoue & Lutz Kilian, 2020. "The Role of the Prior in Estimating VAR Models with Sign Restrictions," Working Papers 2030, Federal Reserve Bank of Dallas.
    10. Dominik Bertsche, 2019. "The effects of oil supply shocks on the macroeconomy: a Proxy-FAVAR approachThe effects of oil supply shocks on the macroeconomy: a Proxy-FAVAR approach," Working Paper Series of the Department of Economics, University of Konstanz 2019-06, Department of Economics, University of Konstanz.
    11. Bacchiocchi, Emanuele & Bastianin, Andrea & Missale, Alessandro & Rossi, Eduardo, 2016. "Structural analysis with mixed frequencies: monetary policy, uncertainty and gross capital flows," Working Papers 2016-04, Joint Research Centre, European Commission.
    12. Thorsten Drautzburg, 2020. "A narrative approach to a fiscal DSGE model," Quantitative Economics, Econometric Society, vol. 11(2), pages 801-837, May.
    13. Matthew Read, 2022. "The Unit-effect Normalisation in Set-identified Structural Vector Autoregressions," RBA Research Discussion Papers rdp2022-04, Reserve Bank of Australia.
    14. Emanuele Bacchiocchi & Toru Kitagawa, 2020. "Locally- but not globally-identified SVARs," CeMMAP working papers CWP40/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    15. Christiane Baumeister & James D. Hamilton, 2020. "Advances in Using Vector Autoregressions to Estimate Structural Magnitudes," NBER Working Papers 27014, National Bureau of Economic Research, Inc.
    16. Bacchiocchi, Emanuele & Bastianin, Andrea & Missale, Alessandro & Rossi, Eduardo, 2020. "Structural analysis with mixed-frequency data: A model of US capital flows," Economic Modelling, Elsevier, vol. 89(C), pages 427-443.
    17. Evans, Charles L. & Marshall, David A., 2007. "Economic determinants of the nominal treasury yield curve," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1986-2003, October.
    18. Gossé, Jean-Baptiste & Guillaumin, Cyriac, 2013. "L’apport de la représentation VAR de Christopher A. Sims à la science économique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(4), pages 309-319, Décembre.
    19. Neusser, Klaus, 2016. "A topological view on the identification of structural vector autoregressions," Economics Letters, Elsevier, vol. 144(C), pages 107-111.
    20. Josué Diwambuena & Jean-Paul K. Tsasa, 2021. "The Real Effects of Uncertainty Shocks: New Evidence from Linear and Nonlinear SVAR Models," BEMPS - Bozen Economics & Management Paper Series BEMPS87, Faculty of Economics and Management at the Free University of Bozen.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2102.04048. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.