Since 2014
A Back-of-the-Envelope Rule to Identify Atheoretical VARs
Brazilian Review of Econometrics
View Archive Info| Field | Value | |
| Title |
A Back-of-the-Envelope Rule to Identify Atheoretical VARs
A Back-of-the-Envelope Rule to Identify Atheoretical VARs |
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| Creator |
Urzúa, Carlos M.
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| Description |
Vector autoregressive models are often used in Macroeconomics to draw conclusions about the effects of policy innovations. However, those results depend on the researcher’s priors about the particular ordering of the variables. As an alternative, this paper presents a very simple rule based on the maximum entropy principle that can be used to find the “most likely” ordering. The proposal is illustrated in the case of a VAR model of the U.S. economy. It is found that monetary policy shocks are better represented by innovations in the federal funds rate rather than in non-borrowed reserves.
Vector autoregressive models are often used in Macroeconomics to draw conclusions about the effects of policy innovations. However, those results depend on the researcher’s priors about the particular ordering of the variables. As an alternative, this paper presents a very simple rule based on the maximum entropy principle that can be used to find the “most likely” ordering. The proposal is illustrated in the case of a VAR model of the U.S. economy. It is found that monetary policy shocks are better represented by innovations in the federal funds rate rather than in non-borrowed reserves. |
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| Publisher |
Sociedade Brasileira de Econometria
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| Date |
2008-11-01
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion |
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| Format |
application/pdf
application/pdf |
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| Identifier |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/1514
10.12660/bre.v28n22008.1514 |
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| Source |
Brazilian Review of Econometrics; Vol. 28 No. 2 (2008); 249-261
Brazilian Review of Econometrics; v. 28 n. 2 (2008); 249-261 1980-2447 |
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| Language |
eng
por |
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| Relation |
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/1514/934
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/1514/935 |
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