Identification and Estimation in Nonfundamental Structural Models

Christian Gourieroux, Alain Monfort and Jean-Paul Renne
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Christian Gourieroux: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: The basic assumption of a structural vector autoregressive moving average (SVARMA) model is that it is driven by a white noise whose components are uncorrelated or independent and can be interpreted as economic shocks, called "structural" shocks. When the errors are Gaussian, independence is equivalent to non-correlation and these models face two identification issues. The first identification problem is "static" and is due to the fact that there is an infinite number of linear transformations of a given random vector making its components uncorrelated. The second identification problem is "dynamic" and is a consequence of the fact that, even if a SVARMA admits a non-invertible moving average (MA) matrix polynomial, it may feature the same second-order dynamic properties as a VARMA process in which the MA matrix polynomials are invertible (the fundamental representation). The aim of this article is to explain that these difficulties are mainly due to the Gaussian assumption, and that both identification challenges are solved in a non-Gaussian framework if the structural shocks are assumed to be instantaneously and serially independent. We develop newparametric and semi-parametric estimation methods that accommodate non-fundamentalness in the MA dynamics. The functioning and performances of these methods are illustrated by applications conducted on both simulated and real data.

Keywords: Structural VARMA; Fundamental Representation; Identification; Structural Shocks; Impulse Response Function (search for similar items in EconPapers)
Date: 2020-07
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Citations: View citations in EconPapers (2)

Published in Review of Economic Studies, 2020, 87 (4), pp.1915-1953. ⟨10.1093/restud/rdz028⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03330924

DOI: 10.1093/restud/rdz028

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