IDEAS home Printed from https://ideas.repec.org/a/ijf/ijfiec/v9y2004i3p229-244.html
   My bibliography  Save this article

Estimating structural macroeconomic shocks through long-run recursive restrictions on vector autoregressive models: the problem of identification

Author

Listed:
  • Mark P. Taylor

    (Department of Economics, University of Warwick, and Centre for Economic Policy Research, UK)

Abstract

We demonstrate that a popular method of estimating underlying structural macroeconomic shocks and their impulse-response functions through recursive long-run structural restrictions on a vector autoregressive representation is not uniquely identified. We show, however, that it may be possible to infer additional qualitative restrictions to achieve identification. We illustrate with two applied examples, corresponding to a simple aggregate supply-aggregate demand framework for the USA and to a stochastic Mundell-Fleming-Dornbusch framework for the USA and Japan. The second example also illustrates how over-identifying restrictions of the underlying framework may be examined informally. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Mark P. Taylor, 2004. "Estimating structural macroeconomic shocks through long-run recursive restrictions on vector autoregressive models: the problem of identification," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(3), pages 229-244.
    • Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:3:p:229-244
    DOI: 10.1002/ijfe.247
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/ijfe.247
    File Function: Link to full text; subscription required
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.247?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:cup:macdyn:v:5:y:2001:i:4:p:466-81 is not listed on IDEAS
    2. Bayoumi, Tamim & Taylor, Mark P, 1995. "Macro-economic Shocks, the ERM, and Tri-polarity," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 321-331, May.
    3. Lothian, James R. & Taylor, Mark P., 1997. "Real exchange rate behavior," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 945-954, December.
    4. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156, National Bureau of Economic Research, Inc.
    5. Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December.
    6. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
    7. David Hendry & Maozu Lu & Grayham E. Mizon, 2001. "Model Identification and Non-unique Structure," Economics Papers 2002-W10, Economics Group, Nuffield College, University of Oxford.
    8. Ahmed, Shaghil & Ickes, Barry W. & Ping Wang & Byung Sam Yoo, 1993. "International Business Cycles," American Economic Review, American Economic Association, vol. 83(3), pages 335-359, June.
    9. Anonymous, 1962. "International Monetary Fund," International Organization, Cambridge University Press, vol. 16(1), pages 230-231, January.
    10. Anonymous, 1962. "International Monetary Fund," International Organization, Cambridge University Press, vol. 16(4), pages 876-878, October.
    11. Granger, Clive W.J., 2001. "Overview Of Nonlinear Macroeconometric Empirical Models," Macroeconomic Dynamics, Cambridge University Press, vol. 5(4), pages 466-481, September.
    12. Kilian, Lutz, 2001. "Impulse Response Analysis in Vector Autoregressions with Unknown Lag Order," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(3), pages 161-179, April.
    13. Anonymous, 1962. "International Monetary Fund," International Organization, Cambridge University Press, vol. 16(3), pages 619-631, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard H. Clarida & Mark P. Taylor, 2003. "Nonlinear Permanent - Temporary Decompositions in Macroeconomics and Finance," Economic Journal, Royal Economic Society, vol. 113(486), pages 125-139, March.
    2. Annika Alexius & Erik Post, 2008. "Exchange rates and asymmetric shocks in small open economies," Empirical Economics, Springer, vol. 35(3), pages 527-541, November.
    3. Ronayne, David, 2011. "Which Impulse Response Function?," The Warwick Economics Research Paper Series (TWERPS) 971, University of Warwick, Department of Economics.
    4. Helmut Lütkepohl, 2013. "Reducing confidence bands for simulated impulse responses," Statistical Papers, Springer, vol. 54(4), pages 1131-1145, November.
    5. Hyeon-Seung Huh, 2013. "A Monte Carlo test for the identifying assumptions of the Blanchard and Quah (1989) model," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 601-605, April.
    6. Lutz Kilian, 2013. "Structural vector autoregressions," Chapters, in: Nigar Hashimzade & Michael A. Thornton (ed.), Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 22, pages 515-554, Edward Elgar Publishing.
    7. Markku Lanne & Henri Nyberg, 2015. "Nonlinear dynamic interrelationships between real activity and stock returns," CREATES Research Papers 2015-36, Department of Economics and Business Economics, Aarhus University.
    8. Ossama Mikhail, 2005. "What Happens After A Technology Shock? A Bayesian Perspective," Macroeconomics 0510016, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
    2. Maurice Obstfeld, 1995. "Intenational Currency Experience: New Lessons and Lessons Relearned," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 119-220.
    3. McKibbin, Warwick J. & Bok, Tomas, 2001. "The European Monetary Union: were there alternatives to the ECB?: A quantitative evaluation," Journal of Policy Modeling, Elsevier, vol. 23(7), pages 775-806, October.
    4. Skorepa, Michal & Komarek, Lubos, 2015. "Sources of asymmetric shocks: The exchange rate or other culprits?," Economic Systems, Elsevier, vol. 39(4), pages 654-674.
    5. repec:nrb:journl:v:23:y:2011:i:2:p:3 is not listed on IDEAS
    6. Bamadev Paudel Ph.D., 2011. "New Open Economy Macroeconomics: Evidence from an Empirical Test on South Asian Economic Data," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(2), pages 31-51, October.
    7. Agnieszka Stazka, 2006. "Sources of Real Exchange Rate Fluctuations in Central and Eastern Europe – Temporary or Permanent?," CESifo Working Paper Series 1876, CESifo.
    8. Dirk Steffen & Ingo Pitterle, 2004. "Spillover Effects of Fiscal Policy Under Flexible Exchange Rates," Econometric Society 2004 Australasian Meetings 286, Econometric Society.
    9. Edward Ghartey, 2006. "Exchange Pressure, Sterilized Intervention and Monetary Policy in Ghana," EcoMod2006 272100031, EcoMod.
    10. Jyh-Lin Wu, 1994. "Fiscal announcements and real exchange rate dynamics," Open Economies Review, Springer, vol. 5(2), pages 177-190, March.
    11. Amir H. Mozayani & Sanaz Parvizi, 2016. "Exchange Rate Misalignment in Oil Exporting Countries (OPEC): Focusing on Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(2), pages 261-276, Spring.
    12. Michael Michaely, 1971. "An Over-all View of Policy Patterns," NBER Chapters, in: The Responsiveness of Demand Policies to Balance of Payments: Postwar Patterns, pages 30-70, National Bureau of Economic Research, Inc.
    13. Nazia Abdul Rehman & Musarrat Shamshir & Khurram Shakir, 2020. "Correlation of Macroeconomic Variables with Twin Deficit in Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 16-11.
    14. Busse, Matthias & Shams, Rasul, 2003. "Trade Effects of the East African Community: Do We Need a Transitional Fund?," HWWA Discussion Papers 240, Hamburg Institute of International Economics (HWWA).
    15. repec:zbw:bofitp:2008_005 is not listed on IDEAS
    16. Yana Valeryevna Dyomina, 2019. "Cross-Border Capital Flows in East Asia: Impact of Monetary Policy Measures," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 99-124.
    17. Svitlana Galeshchuk, 2017. "Technological bias at the exchange rate market," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 24(2-3), pages 80-86, April.
    18. Dąbrowski, Marek A. & Papież, Monika & Śmiech, Sławomir, 2024. "Output volatility and exchange rates: New evidence from the updated de facto exchange rate regime classifications," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 894-908.
    19. Yu Hsing, 2012. "Test of the trilemma for five selected Asian countries and policy implications," Applied Economics Letters, Taylor & Francis Journals, vol. 19(17), pages 1735-1739.
    20. Hoon, Hian Teck & Phelps, Edmund S., 2007. "A structuralist model of the small open economy in the short, medium and long run," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 227-254, June.
    21. Mr. Felix Fischer & Charlotte J. Lundgren & Mr. Samir Jahjah, 2013. "Making Monetary Policy More Effective: The Case of the Democratic Republic of the Congo," IMF Working Papers 2013/226, International Monetary Fund.
    22. Mr. James M. Boughton, 2002. "On the Origins of the Fleming-Mundell Model," IMF Working Papers 2002/107, International Monetary Fund.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:9:y:2004:i:3:p:229-244. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.