Asymptotically Valid Bootstrap Inference for Proxy SVARs

Carsen Jentsch and Kurt Lunsford

No 19-08, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Proxy structural vector autoregressions identify structural shocks in vector autoregressions with external variables that are correlated with the structural shocks of interest but uncorrelated with all other structural shocks. We provide asymptotic theory for this identification approach under mild ?-mixing conditions that cover a large class of uncorrelated, but possibly dependent innovation processes, including conditional heteroskedasticity. We prove consistency of a residual-based moving block bootstrap for inference on statistics such as impulse response functions and forecast error variance decompositions. Wild bootstraps are proven to be generally invalid for these statistics and their coverage rates can be badly and persistently mis-sized.

Keywords: Wild Bootstrap; Mixing; Proxy Variables; Residual-Based Moving Block Bootstrap; Structural Vector Autoregression; External Instruments (search for similar items in EconPapers)
JEL-codes: C30 C32 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2019-05-03
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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Citations: View citations in EconPapers (12)

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Journal Article: Asymptotically Valid Bootstrap Inference for Proxy SVARs (2022)
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DOI: 10.26509/frbc-wp-201908

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