Inference in structural vector autoregressions when the identifying assumptions are not fully believed : reevaluating the role of monetary policy in economic fluctuations
Christiane Baumeister, James D. Hamilton
Reporting point estimates and error bands for structural vector autoregressions that are only set identified is a very common practice. However, unless the researcher is persuaded on the basis of prior information that some parameter values are more plausible than others, this common practice has no formal justification. When the role and reliability of prior information is defended, Bayesian posterior probabilities can be used to form an inference that incorporates doubts about the identifying assumptions. We illustrate how prior information can be used about both structural coefficients and the impacts of shocks, and propose a new distribution, which we call the asymmetric t distribution, for incorporating prior beliefs about the signs of equilibrium impacts in a nondogmatic way. We apply these methods to a three-variable macroeconomic model and conclude that monetary policy shocks were not the major driver of output, inflation, or interest rates during the Great Moderation.
Year of publication: |
2018 ; Revised May 3, 2018
|
---|---|
Authors: | Baumeister, Christiane ; Hamilton, James D. |
Publisher: |
Munich : CESifo, Center for Economic Studies & Ifo Institute |
Subject: | structural vector autoregressions | set identification | monetary policy | impulse-response functions | historical decompositions | model uncertainty | informative priors | Bayes-Statistik | Bayesian inference | VAR-Modell | VAR model | Dekompositionsverfahren | Decomposition method | Induktive Statistik | Statistical inference | Makroökonomisches Modell | Macroeconomic model | Geldpolitik | Monetary policy |
Saved in:
freely available
Extent: | 1 Online-Ressource (circa 54 Seiten) Illustrationen |
---|---|
Series: | CESifo working papers. - München : [Verlag nicht ermittelbar], ISSN 2364-1428, ZDB-ID 2065232-X. - Vol. no. 7048 |
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature |
Language: | English |
Other identifiers: | hdl:10419/180310 [Handle] |
Classification: | C11 - Bayesian Analysis ; C32 - Time-Series Models ; E52 - Monetary Policy (Targets, Instruments, and Effects) |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10011847554