Narrative Sign Restrictions for SVARs

Juan Antolin-Diaz and Juan F Rubio-Ramirez

No 2017-07, Working Papers from FEDEA

Abstract: We identify structural vector autoregressions using narrative sign restrictions. Narrative sign restrictions constrain the structural shocks and the historical decomposition around key historical events, ensuring that they agree with the established narrative account of these episodes. Using models of the oil market and monetary policy, we show that narrative sign restrictions are highly informative. We highlight that adding a single narrative sign restriction dramatically sharpens and even changes the inference of SVARs originally identified via traditional sign restrictions. Our approach combines the appeal of narrative methods with the popularized usage of traditional sign restrictions.

Date: 2017-03
New Economics Papers: this item is included in nep-ets
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Related works:
Journal Article: Narrative Sign Restrictions for SVARs (2018)
Working Paper: Narrative Sign Restrictions for SVARs (2016)
Working Paper: Narrative Sign Restrictions for SVARs (2016)
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