Inference for VARs Identified with Sign Restrictions

Eleonora Granziera; Hyungsik Roger Moon; Frank Schorfheide

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arXiv · 1709.10196

Inference for VARs Identified with Sign Restrictions

Eleonora Granziera·Hyungsik Roger Moon·Frank Schorfheide

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Abstract

There is a fast growing literature that set-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). Most methods that have been used to construct pointwise coverage bands for impulse responses of sign-restricted SVARs are justified only from a Bayesian perspective. This paper demonstrates how to formulate the inference problem for sign-restricted SVARs within a moment-inequality framework. In particular, it develops methods of constructing confidence bands for impulse response functions of sign-restricted SVARs that are valid from a frequentist perspective. The paper also provides a comparison of frequentist and Bayesian coverage bands in the context of an empirical application - the former can be substantially wider than the latter.

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BibTeX RIS

Eleonora Granziera, Hyungsik Roger Moon, Frank Schorfheide. 2018-02-07. Inference for VARs Identified with Sign Restrictions. https://arxiv.org/abs/1709.10196

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