Working Paper

Are spectral estimators useful for implementing long-run restrictions in SVARs?

Abstract: No, not really, since spectral estimators suffer from small sample and misspecification biases just as VARs do. Spectral estimators are no panacea for implementing long-run restrictions. ; In addition, when combining VAR coefficients with non-parametric estimates of the spectral density, care needs to be taken to consistently account for information embedded in the non-parametric estimates about serial correlation in VAR residuals. This paper uses a spectral factorization to ensure a correct representation of the data's variance. But this cannot overcome the fundamental problems of estimating the long-run dynamics of macroeconomic data in samples of typical length.

Keywords: time series analysis; Vector analysis;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2010

Number: 2010-09