DSGE model restrictions for structural VAR identification

Philip Liu () and Konstantinos Theodoridis

No 402, Bank of England working papers from Bank of England

Abstract: The identification of reduced-form VAR model had been the subject of numerous debates in the literature. Different sets of identifying assumptions can lead to very different conclusions in the policy debate. This paper proposes a theoretically consistent identification strategy using restrictions implied by a DSGE model. Monte Carlo simulations suggest the proposed identification strategy is successful in recovering the true structural shocks from the data. In the face of misspecified model restrictions, the data tend to push the identified VAR responses away from the misspecified model and closer to the true data generating process.

Keywords: VAR identification; model misspecification; DSGE model (search for similar items in EconPapers)
JEL-codes: E52 F41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-10-28
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: DSGE Model Restrictions for Structural VAR Identification (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0402

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