Sign Restrictions in Structural Vector Autoregressions: A Critical Review

The paper provides a review of the estimation of structural VARs with sign restrictions. It is shown how sign restrictions solve the parametric identification problem present in structural systems but leave the model identification problem unresolved. A market and a macro model are used to illustrate these points. Suggestions have been made on how to find a unique model. These are reviewed, along with some of the difficulties that can arise in how one is to use the impulse responses found with sign restrictions.