Download This PaperAdvances in Using Vector Autoregressions to Estimate Structural Magnitudes
47 Pages Posted: 20 Apr 2020 Last revised: 25 Apr 2026
There are 2 versions of this paper
Advances in Using Vector Autoregressions to Estimate Structural Magnitudes
Advances in Structural Vector Autoregressions with Imperfect Identifying Information
Date Written: April 2020
Abstract
This paper surveys recent advances in drawing structural conclusions from vector autoregressions, providing a unified perspective on the role of prior knowledge. We describe the traditional approach to identification as a claim to have exact prior information about the structural model and propose Bayesian inference as a way to acknowledge that prior information is imperfect or subject to error. We raise concerns from both a frequentist and a Bayesian perspective about the way that results are typically reported for VARs that are set-identified using sign and other restrictions. We call attention to a common but previously unrecognized error in estimating structural elasticities and show how to correctly estimate elasticities even in the case when one only knows the effects of a single structural shock.
Suggested Citation: Suggested Citation