Identifying VARs through Heterogeneity: An Application to Bank Runs

Ferre De Graeve and Alexei Karas

No 244, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We propose to incorporate cross-sectional heterogeneity into structural VARs. Heterogeneity provides an additional dimension along which one can identify structural shocks and perform hypothesis tests. We provide an application to bank runs, based on microeconomic deposit market data. We impose identification restrictions both in the cross-section (across insured and non-insured banks) and across variables (as in macro SVARs). We thus (i) identify bank runs, (ii) quantify the contribution of competing theories, and, (iii) evaluate policies such as deposit insurance. The application suggests substantial promise for the approach and has strong policy implications.

Keywords: Identification; SVAR; panel-VAR; Heterogeneity; Bank run (search for similar items in EconPapers)
JEL-codes: C30 E50 G01 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2010-07-01
New Economics Papers: this item is included in nep-ban, nep-cba and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0244

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