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Structural Vector Autoregressions with Nonnormal Residuals

  • Markku Lanne
  • Helmut Luetkepohl

In structural vector autoregressive (SVAR) models identifying restrictions for shocks and impulse responses are usually derived from economic theory or institutional constraints. Sometimes the restrictions are insufficient for identifying all shocks and impulse responses. In this paper it is pointed out that specific distributional assumptions can also help in identifying the structural shocks. In particular, a mixture of normal distributions is considered as a plausible model that can be used in this context. Our model setup makes it possible to test restrictions which are just-identifying in a standard SVAR framework. In particular, we can test for the number of transitory and permanent shocks in a cointegrated SVAR model. The results are illustrated using a data set from King, Plosser, Stock and Watson (1991) and a system of US and European interest rates.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-01/cesifo1_wp1651.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1651.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1651
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  1. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  2. Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999. "Comparison of bootstrap confidence intervals for impulse responses of German monetary systems," SFB 373 Discussion Papers 1999,29, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Charles L. Evans & David A. Marshall, 1997. "Monetary policy and the term structure of nominal interest rates: evidence and theory," Working Paper Series, Macroeconomic Issues WP-97-10, Federal Reserve Bank of Chicago.
  4. Lucas, André, 1997. "Cointegration Testing Using Pseudolikelihood Ratio Tests," Econometric Theory, Cambridge University Press, vol. 13(02), pages 149-169, April.
  5. Boswijk, H. Peter & Lucas, André, 1997. "Semi-nonparametric cointegration testing," Serie Research Memoranda 0041, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  6. Ralf Brüggemann & Helmut Lütkepohl, 2005. "Uncovered Interest Rate Parity and the Expectations Hypothesis of the Term Structure: Empirical Results for the U.S. and Europe," SFB 649 Discussion Papers SFB649DP2005-035, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Lanne, Markku & Saikkonen, Pentti, 2007. "A Multivariate Generalized Orthogonal Factor GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 61-75, January.
  8. Nikolaus A. Siegfried, 2002. "An information-theoretic extension to structural VAR modelling," Econometrics 0203005, EconWPA.
  9. repec:cup:macdyn:v:5:y:2001:i:1:p:81-100 is not listed on IDEAS
  10. repec:dgr:vuarem:1997-41 is not listed on IDEAS
  11. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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