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Sign Restrictions in Structural Vector Autoregressions: A Critical Review

Listed author(s):
  • Renee Fry
  • Adrian Pagan

The paper provides a review of the estimation of structural VARs with sign restrictions. It is shown how sign restrictions solve the parametric identification problem present in structural systems but leave the model identification problem unresolved. A market and a macro model are used to illustrate these points. Suggestions have been made on how to find a unique model. These are reviewed, along with some of the difficulties that can arise in how one is to use the impulse responses found with sign restrictions.

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File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-03/22_fry_pagan_2010.pdf
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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2010-22.

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Length: 37 pages
Date of creation: Jul 2010
Handle: RePEc:een:camaaa:2010-22
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