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An Introduction into the SVAR Methodology: Identification, Interpretation and Limitations of SVAR models

  • Jan Gottschalk
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    This paper aims to provide a non-technical introduction into the SVAR methodology. Particular emphasize is put on the approach to identification in SVAR models, which is compared to identification in simultaneous equation models. It is shown that SVAR models are useful tools to analyze the dynamics of a model by subjecting it to an unexpected shock, whereas simultaneous equation models are better suited for policy simulations. A draw back of the SVAR methodology is that due to the low dimension of typical SVAR models the assumption that the underlying shocks are orthogonal is likely to be fairly restrictive.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/an-introduction-into-the-svar-methodology-identification-interpretation-and-limitations-of-svar-models/kap1072.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1072.

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    Length: 42 pages
    Date of creation: Aug 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1072
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