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Structural Vector Autoregressions: Checking Identifying Long-Run Restrictions via Heteroskedasticity

Aufsätze referiert extern - Web of Science

Helmut Lütkepohl, Anton Velinov

In: Journal of Economic Surveys 30 (2016), 2, S. 377-392


Long-run restrictions have been used extensively for identifying structural shocks in vector autoregressive (VAR) analysis. Such restrictions are typically just-identifying but can be checked by utilizing changes in volatility. This paper reviews and contrasts the volatility models that have been used for this purpose. Three main approaches have been used, exogenously generated changes in the unconditional residual covariance matrix, changing volatility modelled by a Markov switching mechanism and multivariate generalized autoregressive conditional heteroskedasticity models. Using changes in volatility for checking long-run identifying restrictions in structural VAR analysis is illustrated by reconsidering models for identifying fundamental components of stock prices.

Anton Velinov

Research Associate in the Graduate Center

Keywords: Conditional heteroskedasticity, heteroskedasticity, Markov switching model, vector autoregression, vector GARCH

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