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An IV framework for combining sign and long-run parametric restrictions in SVARs

Lance A. Fisher and Hyeon-seung Huh

Journal of Macroeconomics, 2019, vol. 61, issue C, -

Abstract: This paper derives the sufficient conditions on the coefficients in a system of structural equations which imply the long-run exclusion restrictions on the impulse responses which are used to identify the model. A recent contribution shows a method to impose the sufficient conditions on the structural equations and to estimate them by instrumental variables (IV). This method has the advantage that it can be combined with a new method for sign restrictions which can be cast in an IV framework. This paper shows that the sufficient conditions which imply the two long-run exclusion restrictions in a SVAR taken from the literature imply other long-run exclusion restrictions as well which are not part of the identifying assumptions. In this case, this method is not suitable. This paper shows how to impose the two long-run exclusion restrictions directly on the structural equations of the model on each draw in sign restrictions which utilizes the IV method.

Keywords: Structural vector-autoregression; Sign restrictions; Long-run parametric restrictions; Instrumental variables; Generated coefficients; Algorithms (search for similar items in EconPapers)
JEL-codes: C32 C36 C51 E30 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jmacro.2019.103125

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