Sufficient information in structural VARs
Mario Forni () and
Luca Gambetti ()
Journal of Monetary Economics, 2014, vol. 66, issue C, 124-136
Necessary and sufficient conditions under which a VAR contains sufficient information to estimate the structural shocks are derived. On the basis of this theoretical result we propose two simple tests to detect informational deficiency and a procedure to amend a deficient VAR. A simulation based on a DSGE model with fiscal foresight suggests that our method correctly identifies and fixes the informational problem. In an empirical application, we show that a bivariate VAR including unemployment and labor productivity is informationally deficient. Once the relevant information is included into the model, technology shocks appear to be contractionary.
Keywords: Non-fundamentalness; FAVAR models; ABCD representation (search for similar items in EconPapers)
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Working Paper: Sufficient information in structural VARs (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:66:y:2014:i:c:p:124-136
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