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Structural scenario analysis with SVARs
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Antolin-Diaz, Juan, Petrella, Ivan and Rubio-Ramirez, Juan (2021) Structural scenario analysis with SVARs. Journal of Monetary Economics, 117 . pp. 798-815. doi:10.1016/j.jmoneco.2020.06.001 ISSN 0304-3932.
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Official URL: https://doi.org/10.1016/j.jmoneco.2020.06.001
Abstract
Macroeconomists seeking to construct conditional forecasts often face a choice between taking a stand on the details of a fully-specified structural model or relying on empirical correlations from vector autoregressions and remain silent about the underlying causal mechanisms. This paper develops tools for constructing ``structural scenarios'' that can be given an economic interpretation using identified structural VARs. We provide a unified and transparent treatment of conditional forecasting and structural scenario analysis and relate our approach to entropic forecast tilting. We advocate for a careful treatment of uncertainty, making the methods suitable for density forecasting and risk assessment. We also propose a metric to assess and compare the plausibility of alternative scenarios. We illustrate our methods with two applications: assessing the power of forward guidance about future interest rate policies and stress testing the reaction of bank profitability to an economic recession.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HA Statistics H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Economic forecasting, Monetary policy, Regression analysis, Autoregression (Statistics) | ||||||||
| Journal or Publication Title: | Journal of Monetary Economics | ||||||||
| Publisher: | Elsevier BV | ||||||||
| ISSN: | 0304-3932 | ||||||||
| Official Date: | January 2021 | ||||||||
| Dates: |
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| Volume: | 117 | ||||||||
| Page Range: | pp. 798-815 | ||||||||
| DOI: | 10.1016/j.jmoneco.2020.06.001 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 28 May 2020 | ||||||||
| Date of first compliant Open Access: | 3 June 2022 | ||||||||
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