Working Paper Revision

Inference in Bayesian Proxy-SVARs

Abstract: Motivated by the increasing use of external instruments to identify structural vector autoregressions (SVARs), we develop an algorithm for exact finite sample inference in this class of time series models, commonly known as Proxy-SVARs. Our algorithm makes independent draws from any posterior distribution over the structural parameterization of a Proxy-SVAR. Our approach allows researchers to simultaneously use proxies and traditional zero and sign restrictions to identify structural shocks. We illustrate our methods with two applications. In particular, we show how to generalize the counterfactual analysis in Mertens and Montiel-Olea (2018) to identified structural shocks.

Keywords: SVARs; external instruments; importance sampler;

JEL Classification: C15; C32;

https://doi.org/10.29338/wp2018-16a

Status: Published in 2021

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2021-01-14

Number: 2018-16a

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