An IV framework for combining sign and long-run parametric restrictions in SVARs

Lance A. Fisher, Hyeon seung Huh

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
Article number103125
JournalJournal of Macroeconomics
Volume61
DOIs
Publication statusPublished - 2019 Sep

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Exclusion
Instrumental variables
Structural equations
Sign restrictions
Case method
Coefficients
Impulse response

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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An IV framework for combining sign and long-run parametric restrictions in SVARs. / Fisher, Lance A.; Huh, Hyeon seung.

In: Journal of Macroeconomics, Vol. 61, 103125, 09.2019.

Research output: Contribution to journalArticle

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