Identification of Economic Shocks by Inequality Constraints in Bayesian Structural Vector Autoregression

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dc.contributor University of Helsinki, Faculty of Social Sciences en
dc.contributor University of Helsinki, HECER en
dc.contributor.author Lanne, Markku
dc.contributor.author Luoto, Jani
dc.date.accessioned 2020-07-01T10:19:01Z
dc.date.available 2020-07-01T10:19:01Z
dc.date.issued 2020-04
dc.identifier.citation Lanne , M & Luoto , J 2020 , ' Identification of Economic Shocks by Inequality Constraints in Bayesian Structural Vector Autoregression ' , Oxford Bulletin of Economics and Statistics , vol. 82 , no. 2 , pp. 425-452 . https://doi.org/10.1111/obes.12338 en
dc.identifier.issn 0305-9049
dc.identifier.other PURE: 126798127
dc.identifier.other PURE UUID: 3357013b-9fe9-4ef2-a5ea-d98532e26339
dc.identifier.other WOS: 000481390800001
dc.identifier.other ORCID: /0000-0001-9397-2578/work/73241434
dc.identifier.uri http://hdl.handle.net/10138/317213
dc.description.abstract Theories often make predictions about the signs of the effects of economic shocks on observable variables, thus implying inequality constraints on the parameters of a structural vector autoregression (SVAR). We introduce a new Bayesian procedure to evaluate the probabilities of such constraints, and, hence, to validate the theoretically implied economic shocks. We first estimate a SVAR, where the shocks are identified by statistical properties of the data, and subsequently label these statistically identified shocks by the Bayes factors calculated from their probabilities of satisfying given inequality constraints. In contrast to the related sign restriction approach that also makes use of theoretically implied inequality constraints, no restrictions are imposed. Hence, it is possible that only a subset or none of the theoretically implied shocks can be labelled. In the latter case, we conclude that the data do not lend support to the theory implying the signs of the effects in question. We illustrate the method by empirical applications to the crude oil market, and U.S. monetary policy. en
dc.format.extent 28
dc.language.iso eng
dc.relation.ispartof Oxford Bulletin of Economics and Statistics
dc.rights en
dc.subject SIGN RESTRICTIONS en
dc.subject DISENTANGLING DEMAND en
dc.subject SUPPLY SHOCKS en
dc.subject OIL MARKET en
dc.subject 511 Economics en
dc.title Identification of Economic Shocks by Inequality Constraints in Bayesian Structural Vector Autoregression en
dc.type Article
dc.description.version Peer reviewed
dc.identifier.doi https://doi.org/10.1111/obes.12338
dc.type.uri info:eu-repo/semantics/other
dc.type.uri info:eu-repo/semantics/publishedVersion
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