Data‐driven identification in SVARs—When and how can statistical characteristics be used to unravel causal relationships?

Helmut Herwartz, Alexander Lange and Simone Maxand

Economic Inquiry, 2022, vol. 60, issue 2, 668-693

Abstract: Structural vector autoregressive analysis aims to trace the contemporaneous linkages among multiple economic time series back to underlying orthogonal structural shocks. Traditionally, researchers rely on economically motivated restrictions to identify these shocks. However, in the presence of heteroskedasticity or non‐Gaussian independent components, only these statistical properties allow a locally unique identification. In this paper, we compare alternative statistical identification procedures under distinct covariance changes and distributional frameworks. We find that statistical identification schemes are robust under distinct data structures to some extent and support researchers in detecting shocks that feature an economic underpinning. The detection of independent components appears most flexible.

Date: 2022
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