Identification and Inference under Narrative Restrictions

Raffaella Giacomini, Toru Kitagawa and Matthew Read
Additional contact information
Raffaella Giacomini: University College London
Toru Kitagawa: Brown University

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: We consider structural vector autoregressions subject to narrative restrictions, which are inequalities involving structural shocks in specific time periods (e.g. shock signs in given quarters). Narrative restrictions are used widely in the empirical literature. However, under these restrictions, there are no formal results on identification or the properties of frequentist approaches to inference, and existing Bayesian methods can be sensitive to prior choice. We provide formal results on identification, propose a computationally tractable robust Bayesian method that eliminates prior sensitivity, and show that it is asymptotically valid from a frequentist perspective. Using our method, we find that inferences about the output effects of US monetary policy obtained under restrictions related to the Volker episode are sensitive to prior choice. Under a richer set of restrictions, there is robust evidence that output falls following a positive monetary policy shock.

Keywords: frequentist coverage; global identification; identified set; robustness (search for similar items in EconPapers)
JEL-codes: C32 E52 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rba.gov.au/publications/rdp/2023/pdf/rdp2023-07.pdf (application/pdf)

Related works:
Working Paper: Identification and Inference Under Narrative Restrictions (2021)
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:rba:rbardp:rdp2023-07

DOI: 10.47688/rdp2023-07

Access Statistics for this paper

More papers in RBA Research Discussion Papers from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().