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Identification with external instruments in structural VARs under partial invertibility
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Miranda-Agrippino, Silvia and Ricco, Giovanni (2019) Identification with external instruments in structural VARs under partial invertibility. Working Paper. Coventry: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1213). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
This paper discusses the conditions for identification in SVAR-IVs when only the shock of interest or a subset of the structural shocks can be recovered as a linear combination of the VAR residuals. This condition of partial invertibility is very general, often of empirical relevance, and less stringent than the standard full invertibility that is routinely assumed in the SVAR literature. We show that, underpartial invertibility, the dynamic responses can be correctly recovered using an external instrument even when this correlates with leads and lags of other invertible shocks. We call this a limited lead-lag exogeneity condition. We evaluate our results in a simulated environment, and provide an empirical application to the case of monetary policy shocks.
Item Type: | Working or Discussion Paper (Working Paper) | ||||||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce |
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Divisions: | Faculty of Social Sciences > Economics | ||||||||||||
Library of Congress Subject Headings (LCSH): | Risk management -- Econometric models, Value -- Econometric models, Price fixing , Financial futures | ||||||||||||
Series Name: | Warwick economics research papers series (WERPS) | ||||||||||||
Publisher: | University of Warwick. Department of Economics | ||||||||||||
Place of Publication: | Coventry | ||||||||||||
ISSN: | 0083-7350 | ||||||||||||
Official Date: | July 2019 | ||||||||||||
Dates: |
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Number: | 1213 | ||||||||||||
Number of Pages: | 49 | ||||||||||||
Institution: | University of Warwick | ||||||||||||
Status: | Not Peer Reviewed | ||||||||||||
Publication Status: | Unpublished | ||||||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||||||
Date of first compliant deposit: | 17 July 2019 | ||||||||||||
Date of first compliant Open Access: | 17 July 2019 | ||||||||||||
RIOXX Funder/Project Grant: |
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