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Heteroskedastic Proxy Vector Autoregressions

Helmut Lütkepohl () and Thore Schlaak

No 1876, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In proxy vector autoregressive models, the structural shocks of interest are identified by an instrument. Although heteroskedasticity is occasionally allowed for, it is typically taken for granted that the impact effects of the structural shocks are time-invariant despite the change in their variances. We develop a test for this implicit assumption and present evidence that the assumption of time-invariant impact effects may be violated in previously used empirical models.

Keywords: Structural vector autoregression; proxy VAR; identification through heteroskedasticity (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2020
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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