Narrative Sign Restrictions for SVARs
AbstractWe identify structural vector autoregressions using narrative sign restrictions. Narrative sign restrictions constrain the structural shocks and/or 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 tend to be highly informative. Even a single narrative sign restriction may dramatically sharpen and even change 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.
CitationAntolín-Díaz, Juan, and Juan F. Rubio-Ramírez. 2018. "Narrative Sign Restrictions for SVARs." American Economic Review, 108 (10): 2802-29. DOI: 10.1257/aer.20161852
- C32 Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- E52 Monetary Policy
- Q35 Hydrocarbon Resources
- Q43 Energy and the Macroeconomy