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Federal Reserve Bank of Philadelphia
Working Papers
Inference for VARs identified with sign restrictions
Hyungsik Roger Moon
Frank Schorfheide
Eleonara Granziera
Mihye Lee
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. The authors 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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Hyungsik Roger Moon & Frank Schorfheide & Eleonara Granziera & Mihye Lee, Inference for VARs identified with sign restrictions, Federal Reserve Bank of Philadelphia, Working Papers 11-20, 2011.
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Keywords: Vector autoregression ; Econometric models
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