When Is the Use of Gaussian-inverse Wishart-Haar Priors Appropriate?

Atsushi Inoue and Lutz Kilian

No 19227, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Several recent studies have expressed concern that the Haar prior typically employed in estimating sign-identified VAR models is driving the prior about the structural impulse responses and hence their posterior. In this paper, we provide evidence that the quantitative importance of the Haar prior for posterior inference has been overstated. How sensitive posterior inference is to the Haar prior depends on the width of the identified set of a given impulse response. We demonstrate that this width depends not only on how much the identified set is narrowed by the identifying restrictions imposed on the model, but also depends on the data through the reduced-form model parameters. Hence, the role of the Haar prior can only be assessed on a case-by-case basis. We show by example that, when the identification is sufficiently tight, posterior inference based on a Gaussian-inverse Wishart-Haar prior provides a reasonably accurate approximation.

JEL-codes: C22 C32 C52 E31 (search for similar items in EconPapers)
Date: 2024-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19227 (application/pdf)

Related works:
Journal Article: When Is the Use of Gaussian-Inverse Wishart-Haar Priors Appropriate? (2026)
Working Paper: When Is the Use of Gaussian-inverse Wishart-Haar Priors Appropriate? (2024)
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:19227

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19227

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().