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Sign Restrictions in Structural Vector Autoregressions: A Critical Review

  • Renee Fry

    ()

    (ANU)

  • Adrian Pagan

    ()

    (QUT/UTS)

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: http://www.ncer.edu.au/papers/documents/WPNo57.pdf
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Paper provided by National Centre for Econometric Research in its series NCER Working Paper Series with number 57.

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Date of creation: 28 Jul 2010
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Handle: RePEc:qut:auncer:2010_04
Contact details of provider: Phone: 07 3138 5066
Fax: 07 3138 1500
Web page: http://www.ncer.edu.au

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