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Dynamic Identification in VARs

Author

Listed:
  • Paul Beaudry

    (Bank of Canada)

  • Fabrice Collard

    (Toulouse School of Economics)

  • Patrick Feve

    (Toulouse School of Economics)

  • Alain Guay

    (University of Quebec in Montreal)

  • Franck Portier

    (University College London)

Abstract

Most macroeconomic models, both fully structural models as well as SVAR models, view economic outcomes as the product of a combination of endogenous and exogenous dynamic forces. In particular, the exogenous forces are generally modeled as a set of linearly independent dynamics processes. In this paper we begin by showing that this dual dynamic structure is sufficient to identify the entire set of structural impulse responses inherent to any such model. No extra restrictions are necessary. We then use this observation to suggest how it can be used to evaluate common SVAR restrictions (impact restrictions, long-run restrictions and proxy-VAR), as well as help transpire the role of cross-equation restrictions inherent to more structural models.

Suggested Citation

  • Paul Beaudry & Fabrice Collard & Patrick Feve & Alain Guay & Franck Portier, 2022. "Dynamic Identification in VARs," Working Papers 22-08, Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management.
    • Handle: RePEc:bbh:wpaper:22-08
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    More about this item

    Keywords

    Structural Shocks; Dynamic Identification; SVARs; DSGE models.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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