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A Discussion of the Reliability of Results Obtained with Long-Run Identifying Restrictions

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  • Pierre St-Amant
  • David Tessier

Abstract

In a recent article, Faust and Leeper (1997) discuss reasons why inference from structural VARs identified with long-run restrictions may not be reliable. In this paper, the authors argue that there are reasons to believe that Faust and Leeper's arguments are not devastating in practice. First, simulation exercises suggest that this approach does well when used with data generated with standard macroeconomic models. Second, empirical applications suggest that it gives results that are much more robust than would be implied by Faust and Leeper's main proposition. A reasonable approach would appear to be, therefore, to follow Sims' (1971; 1972) and Dufour's (1997) recommendation and to present robustness checks, allowing readers to judge for themselves what the effects of possible approximation errors might be.

Suggested Citation

  • Pierre St-Amant & David Tessier, 1998. "A Discussion of the Reliability of Results Obtained with Long-Run Identifying Restrictions," Staff Working Papers 98-4, Bank of Canada.
    • Handle: RePEc:bca:bocawp:98-4
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
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    17. repec:cup:etheor:v:12:y:1996:i:4:p:724-31 is not listed on IDEAS
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    Cited by:

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    2. René Lalonde & Jennifer Page & Pierre St-Amant, 1998. "Une nouvelle méthode d'estimation de l'écart de production et son application aux États-Unis, au Canada et à l'Allemagne," Staff Working Papers 98-21, Bank of Canada.
    3. Martha Misas & Carlos Esteban Posada, 2000. "Crecimiento y Ciclos Económicos en Colombia en el Siglo XX: El aporte de un VAR Estructural," Borradores de Economia 155, Banco de la Republica de Colombia.
    4. Martha Misas & Carlos Esteban Posada, 2000. "Crecimiento y Ciclos Económicos en Colombia en el Siglo XX: El aporte de un VAR Estructural," Borradores de Economia 155, Banco de la Republica de Colombia.
    5. Mark S Astley & Tony Yates, 1999. "Inflation and real disequilibria," Bank of England working papers 103, Bank of England.
    6. Jana Juriová, 2015. "The role of foreign sentiment in small open economy," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(2), pages 57-68, June.

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    More about this item

    Keywords

    Econometric and statistical methods;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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