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Underidentified SVAR models: A framework for combining short and long-run restrictions with sign-restrictions

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  • Andrew Binning

    (Norges Bank (Central Bank of Norway))

Abstract

I describe a new method for imposing zero restrictions (both short and long-run) in combination with conventional sign-restrictions. In particular I extend the Rubio-Ramirez et al.(2010) algorithm for applying short and long-run restrictions for exactly identified models to models that are underidentified. In turn this can be thought of as a unifying framework for short-run, long-run and sign restrictions. I demonstrate my algorithm with two examples. In the first example I estimate a VAR model using the Smets & Wouters (2007) dataset and impose sign and zero restrictions based on the impulse responses from their DSGE model. In the second example I estimate a BVAR model using the Mountford & Uhlig (2009) data set and impose the same sign and zero restrictions they use to identify an anticipated government revenue shock.

Suggested Citation

  • Andrew Binning, 2013. "Underidentified SVAR models: A framework for combining short and long-run restrictions with sign-restrictions," Working Paper 2013/14, Norges Bank.
    • Handle: RePEc:bno:worpap:2013_14
    as

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    References listed on IDEAS

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    Keywords

    SVAR; Identification; Impulse responses; Short-run restrictions; Long-run restrictions; Sign restrictions;
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