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Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications

Juan F Rubio-Ramirez (), Daniel Waggoner () and Jonas Arias
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Jonas Arias: Federal Reserve Board

No 472, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper we characterize agnostic priors and propose numerical algorithms for Bayesian inference when using them within SVARs identified by imposing sign and zero restrictions on a function of the structural parameters. As Baumeister and Hamilton (2015a) has made clear, since the data cannot tell apart models satisfying the sign and zero restrictions, priors play a crucial role in this environment. We will emphasize the importance of agnostic priors: any prior density that is equal across observationally equivalent parameters. If the prior is not agnostic, additional restrictions to the proclaimed sign and zero restrictions become part of the identification. While our numerical algorithms use agnostic priors we will show that existing ones use non-agnostic priors. We will use Beaudry, Nam and Wang (2011) work on the relevance of optimism shocks to show the dangers of using non-agnostic priors.

Date: 2016
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https://economicdynamics.org/meetpapers/2016/paper_472.pdf (application/pdf)

Related works:
Working Paper: Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications (2017) Downloads
Working Paper: Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications (2014) Downloads
Working Paper: Inference Based on SVAR Identified with Sign and Zero Restrictions: Theory and Applications (2014) Downloads
Working Paper: Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications (2014) Downloads
Working Paper: Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications (2014) Downloads
Working Paper: Inference Based on SVARs Identied with Sign and Zero Restrictions: Theory and Applications (2013) Downloads
Working Paper: Inference Based on SVARs Identied with Sign and Zero Restrictions: Theory and Applications (2013) Downloads
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More papers in 2016 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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