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Discussion Paper Details

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Title: Inference for VARs Identified with Sign Restrictions

Author(s): Eleonora Granziera, Mihye Lee, Hyungsik Roger Moon and Frank Schorfheide

Publication Date: June 2011

Keyword(s): Bayesian Inference, Frequentist Inference, Partially Identified Models, Sign Restrictions and Structural VARs

Programme Area(s): International Macroeconomics

Abstract: There is a fast growing literature that partially 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). To date, the methods that have been used are only justified from a Bayesian perspective. This paper develops methods of constructing error bands for impulse response functions of sign-restricted SVARs that are valid from a frequentist perspective. We also provide a comparison of frequentist and Bayesian error bands in the context of an empirical application--the former can be twice as wide as the latter.

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Bibliographic Reference

Granziera, E, Lee, M, Moon, H and Schorfheide, F. 2011. 'Inference for VARs Identified with Sign Restrictions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8432