Data and Code for: What Can We Learn From Sign-Restricted VARs?

Principal Investigator(s):  View help for Principal Investigator(s) Christian K. Wolf, MIT

Version:  View help for Version V1

Name File Type Size Last Modified
  aeapp_replication 03/22/2022 10:56:AM

Project Citation: 

Wolf, Christian K. Data and Code for: What Can We Learn From Sign-Restricted VARs? Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-05-17. https://doi.org/10.3886/E165722V1

Project Description

Summary:  View help for Summary I use a simple business-cycle model to illustrate the workings and limitations of sign restrictions in Structural Vector Autoregressions. Three lessons emerge. First, such sign-based identification is vulnerable to ``shock masquerading'': linear combinations of other shocks may be mis-identified as the shock of interest. Second, since the popular Haar prior automatically over-weights more volatile shocks, the implied posterior is decisively shaped by relative shock volatilities – a feature of shocks that has nothing to do with their dynamic causal effects. Third, sign restrictions on structural elasticities – rather than just the usual restrictions on impulse responses – can be highly informative.

Scope of Project

Subject Terms:  View help for Subject Terms sign restrictions; Haar prior; zero restrictions; monetary policy
JEL Classification:  View help for JEL Classification
      C32 Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
      E32 Business Fluctuations; Cycles


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V1 [2022-05-17]

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