Identifying structural VARs from sparse narrative instruments: dynamic effects of U.S. macroprudential policies

Katarzyna Budnik () and Gerhard Rünstler ()

No 2353, Working Paper Series from European Central Bank

Abstract: We study identification in Bayesian proxy VARs for instruments that con-sist of sparse qualitative observations indicating the signs of shocks in specific periods. We propose the Fisher discriminant regression and a non-parametric sign concordance criterion as two alternative methods for achieving correct inference in this case. The former represents a minor deviation from a standard proxy VAR, whereas the non-parametric approach builds on set identification. Our application to U.S. macroprudential policies finds persistent declines in credit volumes and house prices together with moderate declines in GDP and inflation and a widening of corporate bond spreads after a tightening of capital requirements or mortgage underwriting standards. JEL Classification: C32, E44, G38

Keywords: Bayesian proxy VAR; capital requirements; discriminant analysis; mortgage underwriting standards; sign concordance (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-mac
Note: 1355359
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20202353

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