Identifying News Shocks from SVARs

Fève, Patrick and Jidoud, Ahmat (2012) Identifying News Shocks from SVARs. TSE Working Paper, n. 12-287

WarningThere is a more recent version of this item available.
[img]
Preview
Text
Download (310kB) | Preview
Official URL: http://tse-fr.eu/pub/25750

Abstract

This paper investigates the reliability of SVARs to identify the dynamic effects of news shocks. We show analytically that the dynamics implied by SVARs, using both long–run and short–run restrictions, are biased. However, the bias vanishes as long as news shocks account for most of the
variability of the endogenous variable and the economy exhibits strong forward–looking behavior. Our simulation experiments confirm these findings and further suggest that the number of lags is a key ingredient for the success of the VAR setup. Furthermore, a simple correlation diagnostic test shows that news shocks identified using both restrictions are found to exhibit a correlation close to unity, provided that news shocks drive an overwhelming part of aggregate fluctuations.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2012
Uncontrolled Keywords: News shocks, SVARs, Identification, Diagnostic Test, Non–fundamentalness
JEL codes: C32 - Time-Series Models
C52 - Model Evaluation and Selection
E32 - Business Fluctuations; Cycles
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:24
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:25750
URI: http://publications.ut-capitole.fr/id/eprint/15247

Available Versions of this Item

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year