Sector-Specific Supply and Demand Shocks: Joint Identification

Sergey Ivashchenko ()
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Sergey Ivashchenko: Bank of Russia, Russian Federation

No wps129, Bank of Russia Working Paper Series from Bank of Russia

Abstract: This article proposes a technique for computing sign restrictions in large-scale models. The technique is applied to a Bayesian vector autoregression (BVAR) model with 16 industries (16 growth rates, 16 inflations), and the interest rate. The results demonstrate that the suggested tech- nique can yield different implications for the density of relevant measures compared to the con- ventional random draw approach. Shocks identification is more accurate for suggested approach in experiments with simulated from DSGE model data. The usage of industry specific data and identification of demand and supply shock have large influence on identification of MP-shocks. It reveals important elements of transmission mechanics of monetary policy including differences in magnitude and shape of responses on MP-shocks, differences in historical decomposition, differ- ences in importance of demand and supply shocks for interest rates dynamic. Variance decompo- sition shows decrease of relative importance of its own shocks to industries with switching from short-run to long-run decomposition. There are some similarities with input-output tables and some differences those open questions for future researches

Keywords: sign-restriction; BVAR; VAR; SVAR (search for similar items in EconPapers)
JEL-codes: C32 C51 E32 E52 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2024-06
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