Identifying VARS Through Heterogeneity: An Application to Bank Runs

Riksbank Research Paper Series No. 75

Sveriges Riksbank Working Paper Series No. 244

45 Pages Posted: 27 Jan 2011

See all articles by Ferre De Graeve

Ferre De Graeve

KU Leuven - Center for Economic Studies

Alexei Karas

Utrecht University, University College Roosevelt; Utrecht University School of Economics; Centre for Russian International Socio-Political and Economic Studies (CERISE)

Date Written: June 7, 2010

Abstract

We propose to incorporate cross-sectional heterogeneity into structural VARs. Heterogeneity provides an additional dimension along which one can identify structural shocks and perform hypothesis tests. We provide an application to bank runs, based on microeconomic deposit market data. We impose identification restrictions both in the cross-section (across insured and non-insured banks) and across variables (as in macro SVARs). We thus (i) identify bank runs, ii) quantify the contribution of competing theories, and, (iii) evaluate policies such as deposit insurance. The application suggests substantial promise for the approach and has strong policy implications.

Keywords: Identification, SVAR, panel-VAR, Heterogeneity, Bank run

JEL Classification: C3, E5, G01, G21

Suggested Citation

De Graeve, Ferre and Karas, Alexei, Identifying VARS Through Heterogeneity: An Application to Bank Runs (June 7, 2010). Riksbank Research Paper Series No. 75, Sveriges Riksbank Working Paper Series No. 244, Available at SSRN: https://ssrn.com/abstract=1710544 or http://dx.doi.org/10.2139/ssrn.1710544

Ferre De Graeve (Contact Author)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Alexei Karas

Utrecht University, University College Roosevelt ( email )

P.O. Box 94
NL-4331 CB Middelburg
Middelburg, NL-4330 AB
Netherlands
+31 118-655517 (Phone)
+31 118-655508 (Fax)

Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Centre for Russian International Socio-Political and Economic Studies (CERISE) ( email )

Hoveniersberg 24
Ghent, 9000
Belgium
+32 92643480 (Phone)
+32 92643599 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
73
Abstract Views
676
rank
366,354
PlumX Metrics