Projection estimators for structural impulse responses

Jörg Breitung () and Ralf Brüggemann

No 2019-05, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: In this paper we provide a general framework for linear projection estimators for impulse responses in structural vector autoregressions (SVAR). An important advantage of our projection estimator is that for a large class of SVAR systems (that includes the recursive (Cholesky) identification scheme) standard OLS inference is valid without adjustment for generated regressors, autocorrelated errors or nonstationary variables. We also provide a framework for SVAR models that can be estimated by instrumental (proxy) variables. We show that this class of models (that includes also identification by long-run restrictions) result in a set of quadratic moment conditions that can be used to obtain the asymptotic distribution of this estimator, whereas standard inference based on instrumental variable (IV) projections is invalid. Furthermore, we propose a generalized least squares (GLS) version of the projections that performs similarly to the conventional (iterated) method of estimating impulse responses by inverting the estimated SVAR representation into the MA(∞) representation. Monte Carlo experiments indicate that the proposed OLS projections perform similarly to Jord`a’s (2005) projection estimator but enables us to apply standard inference on the estimated impulse responses. The GLS versions of the projections provide estimates with much smaller standard errors and confidence intervals whenever the horizon h of the impulse responses gets large.

Keywords: structural vector autoregressive models; impulse responses; local projections (search for similar items in EconPapers)
JEL-codes: C32 C51 (search for similar items in EconPapers)
Date: 2019-12-11
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.uni-konstanz.de/FuF/wiwi/workingpaperse ... Brueggemann_2019.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:knz:dpteco:1905

Ordering information: This working paper can be ordered from
https://www.wiwi.uni-konstanz.de/en

Access Statistics for this paper

More papers in Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz Contact information at EDIRC.
Bibliographic data for series maintained by Office Ursprung ( this e-mail address is bad, please contact ).