Testing for Sufficient Information in Structural VARs

Mario Forni and Luca Gambetti

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We derive necessary and sufficient conditions under which a set of variables is informationally sufficient, i.e. it contains enough information to estimate the structural shocks with a VAR model. Based on such conditions, we suggest a procedure to test for informational sufficiency. Moreover, we show how to amend the VAR if informational sufficiency is rejected. We apply our procedure to a VAR including TFP, unemployment and per-capita hours worked. We find that the three variables are not informationally sufficient. When adding missing information, the effects of technology shocks change dramatically.

Keywords: Structural VAR; non-fundamentalness; information; FAVAR models; technology shocks. (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Pages: 24
Date: 2011-02-22
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-ets and nep-ict
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Testing for Sufficient Information in Structural VARs (2015)
Working Paper: Testing for Sufficient Information in Structural VARs (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:863.11

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