SVAR Identification From Higher Moments: Has the Simultaneous Causality Problem Been Solved?

José Luis Olea, Mikkel Plagborg-Møller and Eric Qian
Additional contact information
José Luis Olea: Columbia University
Mikkel Plagborg-Møller: Princeton University
Eric Qian: Princeton University
Authors registered in the RePEc Author Service: Mikkel Plagborg-Moller

Working Papers from Princeton University. Economics Department.

Abstract: Two recent strands of the literature on Structural Vector Autoregressions (SVARs) use higher moments for identification. One of them exploits independence and non-Gaussianity of the shocks; the other, stochastic volatility (heteroskedasticity). These approaches achieve point identification without imposing exclusion or sign restrictions. We review this work critically, and contrast its goals with the separate research program that has pushed for macroeconometrics to rely more heavily on credible economic restrictions and institutional knowledge, as is the standard in microeconometric policy evaluation. Identification based on higher moments imposes substantively stronger assumptions on the shock process than standard secondorder SVAR identification methods do. We recommend that these assumptions be tested in applied work. Even when the assumptions are not rejected, inference based on higher moments necessarily demands more from a finite sample than standard approaches do. Thus, in our view, weak identification issues should be given high priority by applied users.

Keywords: Structural Vector Autoregressions; macroeconometrics (search for similar items in EconPapers)
JEL-codes: C01 C10 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: SVAR Identification from Higher Moments: Has the Simultaneous Causality Problem Been Solved? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-24

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