Handling Non - Invertibility : Theories and

نویسنده

  • Jing Han
چکیده

5 Existing research provides no systematic, limited information procedure for handling 6 non-invertibility, despite the well-known inference problem it causes as well as its 7 presence in many types of dynamic systems. Non-invertibility means that structural 8 shocks cannot be recovered from a history of observed variables. It arises from a form 9 of delayed responses due to, among other things, time-to-plan, sticky information or 10 news shocks. Structural VARs rule out non-invertibility by assumption. Inference 11 about structural responses can, in turn, be incorrect. We develop a four-step proce12 dure to partially, and sometimes fully, identify structural responses whether or not 13 non-invertibility is present. Our method combines structural VAR restrictions, e.g. re14 cursive identification, with ”agnostic” identification, e.g. sign restrictions and bounds 15 on forecast error contributions. In two model-generated examples, our procedure re16 covers the structural responses where structural VARs cannot. Also, we apply our 17 procedure to real world data. We show that non-invertibility is unlikely in Fisher’s 18 (2006) study of technology shocks in the U.S. 19 J.E.L. Classification: E3. 20

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Handling Non - Invertibility :

5 Existing research provides no systematic, limited information procedure for handling 6 non-invertibility, despite the well-known inference problem it causes as well as its 7 presence in many types of dynamic systems. Non-invertibility means that structural 8 shocks cannot be recovered from a history of observed variables. It can arise from 9 a form of delayed responses due to, among other thi...

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تاریخ انتشار 2010