This paper derives the sufficient conditions on the coefficients in a system of structural equations which imply the long-run exclusion restrictions on the impulse responses which are used to identify the model. A recent contribution shows a method to impose the sufficient conditions on the structural equations and to estimate them by instrumental variables (IV). This method has the advantage that it can be combined with a new method for sign restrictions which can be cast in an IV framework. This paper shows that the sufficient conditions which imply the two long-run exclusion restrictions in a SVAR taken from the literature imply other long-run exclusion restrictions as well which are not part of the identifying assumptions. In this case, this method is not suitable. This paper shows how to impose the two long-run exclusion restrictions directly on the structural equations of the model on each draw in sign restrictions which utilizes the IV method.
Bibliographical noteFunding Information:
The research by the first author was supported by a Macquarie University OSP grant. The research by the second author is supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea ( NRF-2018S1A5A2A01033502 ).
© 2019 Elsevier Inc.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics