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An information-theoretic extension to structural VAR modelling

  • Nikolaus A. Siegfried

    (Hamburg University)

This paper discusses techniques for estimating structural vector autoregressions. Especially when monetary policy shocks are estimated, VAR residuals turn out to be leptokurtic. It is argued that this is no coincidence but follows directly from the properties of monetary policy decisions. The paper proceeds to suggest an independent components estimator (ICE) that works well with leptokurtic residuals. Furthermore, the ICE permits a closer link between theory and estimation because it avoids informal imposition of zero restrictions. Using the exercises by Blanchard and Quah (1989) and Christiano et al. (1999), the new estimator is demonstrated and contrasted with current modelling techniques.

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File URL: http://econwpa.repec.org/eps/em/papers/0203/0203005.pdf
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Paper provided by EconWPA in its series Econometrics with number 0203005.

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Length: 37 pages
Date of creation: 08 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpem:0203005
Note: Type of Document - Acrobat PDF; prepared on Linux; to print on A4 paper; pages: 37; figures: included. Very preliminary. Comments welcome!
Contact details of provider: Web page: http://econwpa.repec.org

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  1. P.J.G. Vlaar & H. Schuberth, 1999. "Monetary Transmission and Controllability of Money in Europe: aStructural Vector Error Correction Approach," DNB Staff Reports (discontinued) 36, Netherlands Central Bank.
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  3. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184 National Bureau of Economic Research, Inc.
  4. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  5. Aparicio F. M. & Escribano A., 1998. "Information-Theoretic Analysis of Serial Dependence and Cointegration," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 3(3), pages 1-24, October.
  6. Golan, Amos, 2002. "Information and Entropy Econometrics--Editor's View," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 1-15, March.
  7. Rudebusch, Glenn D, 1998. "Do Measures of Monetary Policy in a VAR Make Sense?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 907-31, November.
  8. Uhlig, Harald, 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," CEPR Discussion Papers 2137, C.E.P.R. Discussion Papers.
  9. Weber, Christian E, 1995. "Cyclical Output, Cyclical Unemployment, and Okun's Coefficient: A New Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 433-45, Oct.-Dec..
  10. P. M. Robinson, 1991. "Consistent Nonparametric Entropy-Based Testing," Review of Economic Studies, Oxford University Press, vol. 58(3), pages 437-453.
  11. Scott, Alasdair, 2003. "APPLIED MACROECONOMETRICS Carlo A. Favero Oxford University Press, 2001," Macroeconomic Dynamics, Cambridge University Press, vol. 7(02), pages 313-315, April.
  12. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-53, July.
  13. Mads Kieler & Tuomas Saarenheimo, 1998. "Differences in monetary policy transmission? A case not closed," European Economy - Economic Papers 2008 - 2015 132, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  14. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  15. Boswijk, H. Peter & Lucas, André, 1997. "Semi-nonparametric cointegration testing," Serie Research Memoranda 0041, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  16. Gunter Coenen & Juan Luis Vega, 2000. "The Demand for M3 in the Euro Area," Econometric Society World Congress 2000 Contributed Papers 0976, Econometric Society.
  17. Kirstin Hubrich & Peter J. G. Vlaar, 2000. "Germany and the Euro Area: Differences in the Transmission Process of Monetary Policy," Econometric Society World Congress 2000 Contributed Papers 1802, Econometric Society, revised 08 Nov 2000.
  18. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  19. Stefan Gerlach & Frank Smets, 1995. "The monetary transmission mechanism: Evidence from the G-7 countries," BIS Working Papers 26, Bank for International Settlements.
  20. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  21. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  22. Juselius, Katarina, 1998. "A Structured VAR for Denmark under Changing Monetary Regimes," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 400-411, October.
  23. Faust, Jon, 1998. "The robustness of identified VAR conclusions about money," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 207-244, December.
  24. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.).
  25. Choi, Woon Gyu, 1999. "Asymmetric Monetary Effects on Interest Rates across Monetary Policy Stances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 386-416, August.
  26. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  27. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  28. Boschen, John F & Mills, Leonard O, 1995. "The Relation between Narrative and Money Market Indicators of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 24-44, January.
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