Inference for VARs identified with sign restrictions

Eleonora Granziera, Hyungsik Roger Moon, Frank Schorfheide

Research output: Contribution to journalArticle

4 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)1087-1121
Number of pages35
JournalQuantitative Economics
Volume9
Issue number3
DOIs
Publication statusPublished - 2018 Nov

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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