Modern Econometric Approaches: Application of The ARW Algorithm in Shock Identification

Ivan Todorov
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Ivan Todorov: University of National and World Economy, Bulgaria

Scientific Conference of the Department of General Economic Theory, 2022, issue 1, 55-60

Abstract: Part of the relevance of economic theory is the validation of empirical results and their dissemination. The reliability problems encountered in empirical analysis are often due to the endogeneity of macroeconomic variables. Since the seminal work of Sims (1980), structural vector autoregressives (SVARs) have supplanted large-scale macroeconometric models, but we are unable to interpret how the endogenous variables affect each other if the residuals are not orthogonal. A huge recent step in the development of econometrics is the identification scheme for checking all possible permutations of SVAR models, but retaining only those that have "economically sensible" impulse responses.

Keywords: Eviews; Sign Restrictions; Structural Vector Autoregression; Zero Restrictions (search for similar items in EconPapers)
JEL-codes: E10 (search for similar items in EconPapers)
Date: 2022
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