Inference for VARs Identified with Sign Restrictions

68 Pages Posted: 8 Jun 2011

See all articles by Hyungsik Roger Moon

Hyungsik Roger Moon

University of Southern California - Department of Economics; USC Dornsife Institute for New Economic Thinking

Frank Schorfheide

University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); University of Pennsylvania - The Penn Institute for Economic Research (PIER)

Eleonora Granziera

Bank of Finland

Mihye Lee

University of Southern California - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 6, 2011

Abstract

There is a fast growing literature that partially identifies structural vector autoregressions (SVARs) by imposing sign restrictions on the responses of a subset of the endogenous variables to a particular structural shock (sign-restricted SVARs). To date, the methods that have been used are only justified from a Bayesian perspective. This paper develops methods of constructing error bands for impulse response functions of sign-restricted SVARs that are valid from a frequentist perspective. The authors also provide a comparison of frequentist and Bayesian error bands in the context of an empirical application - the former can be twice as wide as the latter.

Keywords: Bayesian Inference, Frequentist Inference, Partially Identified Models, Sign Restrictions, Structural VARs

JEL Classification: C1, C32

Suggested Citation

Moon, Hyungsik Roger and Schorfheide, Frank and Granziera, Eleonora and Lee, Mihye, Inference for VARs Identified with Sign Restrictions (June 6, 2011). Available at SSRN: https://ssrn.com/abstract=1859510 or http://dx.doi.org/10.2139/ssrn.1859510

Hyungsik Roger Moon (Contact Author)

University of Southern California - Department of Economics ( email )

KAP 300
Los Angeles, CA 90089-0253
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USC Dornsife Institute for New Economic Thinking ( email )

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Frank Schorfheide

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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Philadelphia, PA 19104-6297
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HOME PAGE: http://www.econ.upenn.edu/~schorf

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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University of Pennsylvania - The Penn Institute for Economic Research (PIER) ( email )

Philadelphia, PA
United States

Eleonora Granziera

Bank of Finland ( email )

Snellmaninaukio
Helsinki, Helsinki 00100
Finland

HOME PAGE: http://https://sites.google.com/site/eleonoragranziera/

Mihye Lee

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

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