Abstract

http://ssrn.com/abstract=941989
 
 

References (51)



 
 

Citations (31)



 


 



Assessing Structural VARs


Lawrence J. Christiano


Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Martin Eichenbaum


Northwestern University; National Bureau of Economic Research (NBER)

Robert Vigfusson


Federal Reserve Board - Trade and Quantitative Studies

August 2006

FRB International Finance Discussion Paper No. 866

Abstract:     
This paper analyzes the quality of VAR-based procedures for estimating the response of the economy to a shock. We focus on two key issues. First, do VAR-based confidence intervals accurately reflect the actual degree of sampling uncertainty associated with impulse response functions? Second, what is the size of bias relative to confidence intervals, and how do coverage rates of confidence intervals compare with their nominal size? We address these questions using data generated from a series of estimated dynamic, stochastic general equilibrium models. We organize most of our analysis around a particular question that has attracted a great deal of attention in the literature: How do hours worked respond to an identified shock? In all of our examples, as long as the variance in hours worked due to a given shock is above the remarkably low number of 1 percent, structural VARs perform well. This finding is true regardless of whether identification is based on short-run or long-run restrictions. Confidence intervals are wider in the case of long-run restrictions. Even so, long-run identified VARs can be useful for discriminating among competing economic models

Number of Pages in PDF File: 60

Keywords: Vector autoregression, dynamic stochastic general equilibrium model, confidence intervals, impulse response functions, identification, long run restrictions, specification error, sampling

JEL Classification: C1

working papers series


Download This Paper

Date posted: November 3, 2006  

Suggested Citation

Christiano, Lawrence J. and Eichenbaum, Martin and Vigfusson, Robert, Assessing Structural VARs (August 2006). FRB International Finance Discussion Paper No. 866. Available at SSRN: http://ssrn.com/abstract=941989 or http://dx.doi.org/10.2139/ssrn.941989

Contact Information

Lawrence J. Christiano (Contact Author)
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8231 (Phone)
847-491-7001 (Fax)
Federal Reserve Bank of Cleveland
East 6th & Superior
Cleveland, OH 44101-1387
United States
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
United States
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Martin Eichenbaum
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8232 (Phone)
847-491-7001 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert John Vigfusson
Federal Reserve Board - Trade and Quantitative Studies ( email )
20th St. and Constitution Ave.
Washington, DC 20551
United States
Feedback to SSRN


Paper statistics
Abstract Views: 419
Downloads: 96
Download Rank: 136,931
References:  51
Citations:  31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.266 seconds