Heteroskedastic Proxy Vector Autoregressions: Testing for Time-Varying Impulse Responses in the Presence of Multiple Proxies

42 Pages Posted: 18 May 2022

See all articles by Martin Bruns

Martin Bruns

University of East Anglia (UEA) - School of Economics

Helmut Luetkepohl

German Institute for Economic Research (DIW Berlin)

Date Written: May 2022

Abstract

We propose a test for time-varying impulse responses in heteroskedastic structural vector autoregressions that can be used when the shocks are identified by external proxy variables as a group. The test can be used even if the shocks are not identified individually. The asymptotic analysis is supported by small sample simulations which show good properties of the test. An investigation of the impact of productivity shocks in a small macroeconomic model for the U.S. illustrates the importance of the issue for empirical work.

Keywords: Structural vector autoregression, proxy VAR, heteroskedasticity, productivity shocks

JEL Classification: C32

Suggested Citation

Bruns, Martin and Luetkepohl, Helmut, Heteroskedastic Proxy Vector Autoregressions: Testing for Time-Varying Impulse Responses in the Presence of Multiple Proxies (May 2022). DIW Berlin Discussion Paper No. 2005, 2022, Available at SSRN: https://ssrn.com/abstract=4112324 or http://dx.doi.org/10.2139/ssrn.4112324

Martin Bruns

University of East Anglia (UEA) - School of Economics ( email )

3.06, Registry
University of East Anglia
Norwich, NR4 7TJ
United Kingdom

Helmut Luetkepohl (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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