Type: Working Paper
Structural Vector Autoregressions with Markov Switching: Combining conventional with statistical identification of shocks
Working Paper, EUI ECO, 2011/11
HERWARTZ, Helmut, LUETKEPOHL, Helmut, Structural Vector Autoregressions with Markov Switching: Combining conventional with statistical identification of shocks, EUI ECO, 2011/11 - http://hdl.handle.net/1814/17175
Retrieved from Cadmus, EUI Research Repository
In structural vector autoregressive (SVAR) analysis a Markov regime switching (MS) property can be exploited to identify shocks if the reduced form error covariance matrix varies across regimes. Unfortunately, these shocks may not have a meaningful structural economic interpretation. It is discussed how statistical and conventional identifying information can be combined. The discussion is based on a VAR model for the US containing oil prices, output, consumer prices and a short-term interest rate. The sys- tem has been used for studying the causes of the early millennium economic slowdown based on traditional identification with zero and long-run restric- tions and using sign restrictions. We find that previously drawn conclusions are questionable in our framework.
Cadmus permanent link: http://hdl.handle.net/1814/17175
Series/Number: EUI ECO; 2011/11