Testing for Sufficient Information in Structural VARs

Mario Forni and Luca Gambetti

No 536, Working Papers from Barcelona School of Economics

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: information; technology shocks; non-fundamentalness; Structural VAR; FAVAR models (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Date: 2015-09
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Testing for Sufficient Information in Structural VARs (2011)
Working Paper: Testing for Sufficient Information in Structural VARs (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:536

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