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Fève, Patrick
and Jidoud, Ahmat
(2012)
Identifying News Shocks from SVARs.
TSE Working Paper, n. 12-287
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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 Classification: | 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: | 02 Apr 2021 15:47 |
| OAI Identifier: | oai:tse-fr.eu:25750 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15247 |
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