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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Narrative Sign Restrictions for SVARs
Juan Antolin-Diaz
Juan F. Rubio-Ramirez
Abstract

We identify structural vector autoregressions using narrative sign restrictions. Narrative sign restrictions constrain the structural shocks and/or the historical decomposition around key historical events, ensuring that they agree with the established narrative account of these episodes. Using models of the oil market and monetary policy, we show that narrative sign restrictions tend to be highly informative. Even a single narrative sign restriction may dramatically sharpen and even change the inference of SVARs originally identified via traditional sign restrictions. Our approach combines the appeal of narrative methods with the popularized usage of traditional sign restrictions.


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Juan Antolin-Diaz & Juan F. Rubio-Ramirez, Narrative Sign Restrictions for SVARs, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2016-16, 01 Dec 2016, revised 01 Oct 2017.
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Keywords: narrative information; SVARs; Bayesian approach; sign restrictions; oil market; monetary policy
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