Economics at your fingertips  

Structural vector autoregressions with smooth transition in variances

Helmut Lütkepohl () and Aleksei Netšunajev ()

Journal of Economic Dynamics and Control, 2017, vol. 84, issue C, 43-57

Abstract: In structural vector autoregressive analysis identifying the shocks of interest via heteroskedasticity has become a standard tool. Unfortunately, the approaches currently used for modeling heteroskedasticity all have drawbacks. For instance, assuming known dates for variance changes is often unrealistic while more flexible models based on GARCH or Markov switching residuals are difficult to handle from a statistical and computational point of view. Therefore we propose a model based on a smooth change in variance that is flexible as well as relatively easy to estimate and illustrate its use by analysis of the interaction between monetary policy and the stock market based on a five-dimensional system of U.S. variables. For the benchmark setup it is found that previously used conventional identification schemes in this context are rejected by the data if heteroskedasticity is allowed for. We also illustrate the implications of using different transition variables and varying the sample period.

Keywords: Identification via heteroskedasticity; Monetary policy shocks; Smooth transition VAR models (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-02-19
Handle: RePEc:eee:dyncon:v:84:y:2017:i:c:p:43-57