Narrative Sign Restrictions for Svars

61 Pages Posted: 19 Dec 2016 Last revised: 21 Oct 2017

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-12-01

Abstract

We identify structural vector autoregressions using narrative sign restrictions. Narrative sign restrictions constrain the structural shocks and/or the historical decomposition around key historical events, ensuring that they agree with the established narrative account of these episodes. Using models of the oil market and monetary policy, we show that narrative sign restrictions tend to be highly informative. Even a single narrative sign restriction may dramatically sharpen and even change the inference of SVARs originally identified via traditional sign restrictions. Our approach combines the appeal of narrative methods with the popularized usage of traditional sign restrictions.

Keywords: narrative information, SVARs, Bayesian approach, sign restrictions, oil market, monetary policy

JEL Classification: C32, E52, Q35

Suggested Citation

Antolin-Diaz, Juan and Rubio Ramírez, Juan, Narrative Sign Restrictions for Svars (2016-12-01). FRB Atlanta Working Paper No. 2016-16. Available at SSRN: https://ssrn.com/abstract=2886811

Juan Antolin-Diaz (Contact Author)

Fulcrum Asset Management ( email )

5-7 Chester eld Gardens
London, W1J 5BQ
United Kingdom

Juan Rubio Ramírez

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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