An Introduction into the SVAR Methodology: Identification, Interpretation and Limitations of SVAR models
No 1072, Kiel Working Papers from Kiel Institute for the World Economy (IfW)
This paper aims to provide a non-technical introduction into the SVAR methodology. Particular emphasize is put on the approach to identification in SVAR models, which is compared to identification in simultaneous equation models. It is shown that SVAR models are useful tools to analyze the dynamics of a model by subjecting it to an unexpected shock, whereas simultaneous equation models are better suited for policy simulations. A draw back of the SVAR methodology is that due to the low dimension of typical SVAR models the assumption that the underlying shocks are orthogonal is likely to be fairly restrictive.
Keywords: Structural Vector Autoregressions; Identification; Impulse Response Analysis (search for similar items in EconPapers)
JEL-codes: C51 C32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1072
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