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Combining sign and parametric restrictions in SVARs by Givens Rotations

Lance A. Fisher and Hyeon-seung Huh
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Lance A. Fisher: Macquarie University
Hyeon-seung Huh: Yonsei University

No 2018rwp-122, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper develops a method for combining sign and parametric restrictions in SVARs by means of Givens matrices. The Givens matrix is used to rotate an initial set of orthogonal shocks in the SVAR. Parametric restrictions are imposed on the Givens matrix in a manner which utilises its properties. This gives rise to a system of equations which can be solved recursively for the ¡®angles¡¯ in the constituent Givens matrices to enforce the parametric restrictions. The method is applied to several identifications which involve a combination of sign restrictions, and long-run and/or contemporaneous restrictions in Peersman¡¯s (2005) SVAR for the US economy. The method is compared to the recently developed method of Aries, Rubio-Ramirez and Waggoner (2018) which combines zero and sign restrictions.

Keywords: structural vector autoregressions; sign and parametric restrictions; Givens rotations; QR decomposition (search for similar items in EconPapers)
JEL-codes: C32 C51 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-knm and nep-mac
Date: 2018-06
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Persistent link: https://EconPapers.repec.org/RePEc:yon:wpaper:2018rwp-122

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