Inference for VARs identified with sign restrictions

Eleonora Granziera, Hyungsik Roger Moon, Frank Schorfheide

Research output: Contribution to journalArticlepeer-review

14 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

Bibliographical note

Funding Information:
H.K. Ramapriyan (B) NASA Goddard Space Flight Center, Greenbelt, MD, USA e-mail: rama.ramapriyan@nasa.gov This work was performed by the first author as part of his official duties as an employee of the US government. It was supported by the NASA’s Science Mission Directorate. The remaining authors were supported under Cooperative Agreement NCC5-645 between NASA and George Mason University. The opinions expressed are those of the authors and do not necessarily reflect the official position of NASA.

Publisher Copyright:
Copyright © 2018 The Authors.

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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