Sharpening Economic Interpretation with HARS

Dawis Kim and Tao Zha

No 35483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a unified framework that combines shock volatility with sign and narrative restrictions and provides the theoretical foundation for the computationally efficient sampler HARS. HARS preserves the heteroskedastic likelihood and can be combined with any posterior simulator for the heteroskedastic model. In monetary policy, oil market, and fiscal policy models, the same restrictions deliver substantively different economics once shock heteroskedasticity is accounted for. Homoskedastic SVARs put uncertainty in the wrong place, pushing shock-scale variation into impulse-response uncertainty. Heteroskedasticity sharpens dynamic responses, alters economic conclusions, and restores 90% credible intervals as a practical standard for economic inference.

JEL-codes: C11 C32 E52 E62 Q43 (search for similar items in EconPapers)
Date: 2026-07
Note: EEE EFG ME
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