Inference for VARs Identified with Sign Restrictions
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.
Cite
@article{arxiv.1709.10196,
title = {Inference for VARs Identified with Sign Restrictions},
author = {Eleonora Granziera and Hyungsik Roger Moon and Frank Schorfheide},
journal= {arXiv preprint arXiv:1709.10196},
year = {2018}
}