EconPapers    
Economics at your fingertips  
 

The identification of dominant macroeconomic drivers: coping with confounding shocks

Alistair Dieppe (), Neville Francis and Gene Kindberg-Hanlon

No 2534, Working Paper Series from European Central Bank

Abstract: We address the identification of low-frequency macroeconomic shocks, such as technology, in Structural Vector Autoregressions. Whilst identification issues with long-run restrictions are well documented, we demonstrate that the recent attempt to overcome said issues using the Max-Share approach of Francis et al. (2014) and Barsky and Sims (2011) has its own shortcomings, primarily that they are vulnerable to bias from confounding non-technology shocks, although less so than long-run specifications. We offer a new spectral methodology to improve empirical identification. This new preferred methodology offers equivalent or improved identification in a wide range of data generating processes and when applied to US data. Our findings on the bias generated by confounding shocks also importantly extends to the identification of dominant business-cycle shocks, which will be a combination of shocks rather than a single structural driver. This can result in a mis-characterization of the business cycle anatomy. JEL Classification: C11, C30, E32

Keywords: confounding shocks; identification; long-horizon and business-cycle shocks (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-ecm and nep-mac
Note: 95834
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2534~2383e60ba4.en.pdf (application/pdf)

Related works:
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:ecb:ecbwps:20212534

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2022-07-27
Handle: RePEc:ecb:ecbwps:20212534