Economics at your fingertips  

Identification and inference with ranking restrictions

Pooyan Amir‐Ahmadi and Thorsten Drautzburg
Authors registered in the RePEc Author Service: Pooyan Amir Ahmadi ()

Quantitative Economics, 2021, vol. 12, issue 1, 1-39

Abstract: We propose to add ranking restrictions on impulse‐responses to sign restrictions to narrow the identified set in vector autoregressions (VARs). Ranking restrictions come from micro data on heterogeneous industries in VARs, bounds on elasticities, or restrictions on dynamics. Using both a fully Bayesian conditional uniform prior and prior‐robust inference, we show that these restrictions help to identify productivity news shocks in the data. In the prior‐robust paradigm, ranking restrictions, but not sign restrictions alone, imply that news shocks raise output temporarily, but significantly. This holds both in an application with rankings in the form of heterogeneity restrictions and in another applications with slope restrictions as rankings. Ranking restrictions also narrow bounds on variance decompositions. For example, the bound of the contribution of news shocks to the forecast error variance of output narrows by about 30 pp at the one‐year horizon. While misspecification can be a concern with added restrictions, they are consistent with the data in our applications.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Quantitative Economics from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2022-06-11
Handle: RePEc:wly:quante:v:12:y:2021:i:1:p:1-39