A Structural Vector Autoregression Containing Positive-Valued Components

19 Pages Posted: 27 Dec 2022

See all articles by Henri Nyberg

Henri Nyberg

University of Turku

Samuel Rauhala

University of Turku

Date Written: December 14, 2022

Abstract

We introduce a structural vector autoregressive model containing strictly positive components. Our nonlinear model results in explicit formulae for impulse response and forecast error variance decomposition analyses, which ease practical computations and structural interpretations. We illustrate the model by evaluating the impact of the monetary policy shock in the core three-equation U.S. monetary policy model including a positive-valued nominal interest rate. Our empirical results show important differences but also similarities to the alternative modelling techniques.

Keywords: Nonlinearity, impulse response analysis, forecast error variance decomposition, monetary policy, shadow rate

JEL Classification: C32, E43, E44, E52

Suggested Citation

Nyberg, Henri and Rauhala, Samuel, A Structural Vector Autoregression Containing Positive-Valued Components (December 14, 2022). Available at SSRN: https://ssrn.com/abstract=4301748 or http://dx.doi.org/10.2139/ssrn.4301748

Henri Nyberg (Contact Author)

University of Turku ( email )

Turku, 20014
Finland

Samuel Rauhala

University of Turku ( email )

Turku, 20014
Finland

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