We propose a general estimation principle based on the assumption that instrumental variables (IV) do not explain the error term in a structural equation. The estimators based on the principle is inde- pendent of the normalization constraint, unlike the IV estimators.

We study the reliability of the estimated responses of major economic aggregates to monetary policy shocks. We investigate the bias of the estimated impulse response functions and the reliability of their qualitative features such as their sign and shape and the timing of peaks and troughs. We...