Robust inference in models identified via heteroskedasticity

Daniel Lewis

No 876, Staff Reports from Federal Reserve Bank of New York

Abstract: Identification via heteroskedasticity exploits differences in variances across regimes to identify parameters in simultaneous equations. I study weak identification in such models, which arises when variances change very little or the variances of multiple shocks change close to proportionally. I show that this causes standard inference to become unreliable, outline two tests to detect weak identification, and establish conditions for the validity of nonconservative methods for robust inference on an empirically relevant subset of the parameter vector. I apply these tools to monetary policy shocks, identified using heteroskedasticity in high frequency data. I detect weak identification in daily data, causing standard inference methods to be invalid. However, using intraday data instead allows the shocks to be strongly identified.

Keywords: heteroskedasticity; pretesting; weak identification; monetary policy; robust inference; impulse response functions (search for similar items in EconPapers)
JEL-codes: C12 C32 C36 E43 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018-12-01
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr876.pdf Full text (application/pdf)

Related works:
Journal Article: Robust Inference in Models Identified via Heteroskedasticity (2022)
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:fip:fednsr:876

Ordering information: This working paper can be ordered from
pipubs@ny.frb.org

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli (gabriella.bucciarelli@ny.frb.org).