Exogenous uncertainty and the identification of Structural Vector Autoregressions with external instruments

Giovanni Angelini and Luca Fanelli ()

MPRA Paper from University Library of Munich, Germany

Abstract: We provide necessary and sufficient conditions for the identification of Structural Vector Autoregressions (SVARs) with external instruments, considering the case in which r instruments are used to identify g structural shocks of interest, r>=g>=1. Novel frequentist estimation methods are discussed by considering both a partial shocks identification strategy, where only g structural shocks are of interest and are instrumented, and in a full shocks identification strategy, where despite g structural shocks are instrumented, all n structural shocks of the system can be identified under certain conditions. The suggested approach is applied to empirically investigate whether financial and macroeconomic uncertainty can be approximated as exogenous drivers of U.S. real economic activity, or rather as endogenous responses to first moment shocks, or both. We analyze whether the dynamic causal effects of non-uncertainty shocks on macroeconomic and financial uncertainty are signicant in the period after the Global Financial Crisis.

Keywords: Exogenous Uncertainty; External Instruments; Identification; proxy-SVAR; SVAR. (search for similar items in EconPapers)
JEL-codes: C32 C51 E44 G10 (search for similar items in EconPapers)
Date: 2018-05, Revised 2019-05
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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