A Bootstrap Method for Identifying and Evaluating a Structural Vector Auto-regression

25 Pages Posted: 22 Jul 2008

See all articles by Selva Demiralp

Selva Demiralp

Koc University - Department of Economics

Kevin D. Hoover

Duke University - Departments of Economics and Philosophy

Stephen J. Perez

California State University, Sacramento - Department of Economics

Date Written: 2008

Abstract

Graph-theoretic methods of causal search based on the ideas of Pearl (2000), Spirtes et al. (2000), and others have been applied by a number of researchers to economic data, particularly by Swanson and Granger (1997) to the problem of finding a data-based contemporaneous causal order for the structural vector auto-regression, rather than, as is typically done, assuming a weakly justified Choleski order. Demiralp and Hoover (2003) provided Monte Carlo evidence that such methods were effective, provided that signal strengths were sufficiently high. Unfortunately, in applications to actual data, such Monte Carlo simulations are of limited value, as the causal structure of the true data-generating process is necessarily unknown. In this paper, we present a bootstrap procedure that can be applied to actual data (i.e. without knowledge of the true causal structure). We show with an applied example and a simulation study that the procedure is an effective tool for assessing our confidence in causal orders identified by graph-theoretic search algorithms.

Suggested Citation

Demiralp, Selva and Hoover, Kevin D. and Perez, Stephen J., A Bootstrap Method for Identifying and Evaluating a Structural Vector Auto-regression (2008). Oxford Bulletin of Economics and Statistics, Vol. 70, Issue 4, pp. 509-533, August 2008, Available at SSRN: https://ssrn.com/abstract=1167297 or http://dx.doi.org/10.1111/j.1468-0084.2007.00496.x

Selva Demiralp

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910 Istanbul
Turkey
+212 338 1842 (Phone)

Kevin D. Hoover (Contact Author)

Duke University - Departments of Economics and Philosophy ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Stephen J. Perez

California State University, Sacramento - Department of Economics ( email )

6000 J Street
Sacramento, CA 95819-6082
United States
916-278-6919 (Phone)
916-278-5768 (Fax)

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