A Bootstrap Method for Identifying and Evaluating a Structural Vector Autoregression

38 Pages Posted: 2 Apr 2006

See all articles by Selva Demiralp

Selva Demiralp

Koc University - Department of Economics

Kevin D. Hoover

Duke University - Departments of Economics and Philosophy

Stephen J. Perez

California State University, Sacramento - Department of Economics

Date Written: March 28, 2006

Abstract

Graph-theoretic methods of causal search based in the ideas of Pearl (2000), Spirtes, Glymour, and Scheines (2000), and others have been applied by a number of researchers to economic data, particularly by Swanson and Granger (1997) to the problem of finding a data-based contemporaneous causal order for the structural autoregression (SVAR), rather than, as is typically done, assuming a weakly justified Choleski order. Demiralp and Hoover (2003) provided Monte Carlo evidence that such methods were effective, provided that signal strengths were sufficiently high. Unfortunately, in applications to actual data, such Monte Carlo simulations are of limited value, since the causal structure of the true data-generating process is necessarily unknown. In this paper, we present a bootstrap procedure that can be applied to actual data (i.e., without knowledge of the true causal structure). We show with an applied example and a simulation study that the procedure is an effective tool for assessing our confidence in causal orders identified by graph-theoretic search procedures.

Keywords: vector autoregression (VAR), structural vector autoregression (SVAR), causality, causal order, Choleski order, causal search algorithms, graph-theoretic methods

JEL Classification: C30, C32, C51

Suggested Citation

Demiralp, Selva and Hoover, Kevin D. and Perez, Stephen J., A Bootstrap Method for Identifying and Evaluating a Structural Vector Autoregression (March 28, 2006). Available at SSRN: https://ssrn.com/abstract=894152 or http://dx.doi.org/10.2139/ssrn.894152

Selva Demiralp

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910 Istanbul
Turkey
+212 338 1842 (Phone)

Kevin D. Hoover (Contact Author)

Duke University - Departments of Economics and Philosophy ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Stephen J. Perez

California State University, Sacramento - Department of Economics ( email )

6000 J Street
Sacramento, CA 95819-6082
United States
916-278-6919 (Phone)
916-278-5768 (Fax)

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