Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/61330
Authors: 
Lütkepohl, Helmut
Year of Publication: 
2012
Series/Report no.: 
Discussion Papers, German Institute for Economic Research, DIW Berlin 1235
Abstract: 
It is emphasized that the shocks in structural vector autoregressions are only identified up to sign and it is pointed out that this feature can result in very misleading confidence intervals for impulse responses if simulation methods such as Bayesian or bootstrap methods are used. The confidence intervals heavily depend on which variable is used for fixing the sign of the initial responses. In particular, when the shocks are identified via long-run restrictions the problem can be severe. It is pointed out that a suitable choice of variable for fixing the sign of the initial responses can result in substantial reductions in the confidence bands for impulse responses.
Subjects: 
Vector autoregressive process
impulse responses
bootstrap
Bayesian estimation
JEL: 
C32
Document Type: 
Working Paper

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