Abstract
There is evidence that estimates of long-run impulse responses of structural vector autoregressive (VAR) models based on long-run identifying restrictions may not be very accurate. This finding suggests that using short-run identifying restrictions may be preferable. We compare structural VAR impulse response estimates based on long-run and short-run identifying restrictions and find that long-run identifying restrictions can result in much more precise estimates for the structural impulse responses than restrictions on the impact effects of the shocks.
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Acknowledgements
We thank two anonymous referees for constructive comments on the exposition of the paper. The research for this paper was partly carried out while the first author was a Bundesbank Professor at the Freie Universität Berlin. Financial support was provided by the Deutsche Forschungsgemeinschaft through SFB 649 “Economic Risk” and the National Science Center, Poland (NCN) through HARMONIA 6: UMO-2014/14/M/HS4/00901.
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Lütkepohl, H., Staszewska-Bystrova, A. & Winker, P. Estimation of structural impulse responses: short-run versus long-run identifying restrictions. AStA Adv Stat Anal 102, 229–244 (2018). https://doi.org/10.1007/s10182-017-0300-9
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DOI: https://doi.org/10.1007/s10182-017-0300-9