An information-theoretic extension to structural VAR modelling

Nikolaus A Siegfried

Econometrics from EconWPA

Abstract: This paper discusses techniques for estimating structural vector autoregressions. Especially when monetary policy shocks are estimated, VAR residuals turn out to be leptokurtic. It is argued that this is no coincidence but follows directly from the properties of monetary policy decisions. The paper proceeds to suggest an independent components estimator (ICE) that works well with leptokurtic residuals. Furthermore, the ICE permits a closer link between theory and estimation because it avoids informal imposition of zero restrictions. Using the exercises by Blanchard and Quah (1989) and Christiano et al. (1999), the new estimator is demonstrated and contrasted with current modelling techniques.

Keywords: Structural Vector Autoregressions; Information Theory; Monetary Transmission Mechanism (search for similar items in EconPapers)
JEL-codes: C13 C32 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2002-03-08
Note: Type of Document - Acrobat PDF; prepared on Linux; to print on A4 paper; pages: 37; figures: included. Very preliminary. Comments welcome!
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http://129.3.20.41/eps/em/papers/0203/0203005.pdf (application/pdf)

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Working Paper: An information-theoretic extension to structural VAR modelling (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0203005

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