Qualitative versus quantitative external information for proxy vector autoregressive analysis

A major challenge for proxy vector autoregressive analysis is the construction of a suitable external instrument variable or identifying shock interest. Some authors construct sophisticated proxies that account dating and size while other consider simpler versions use only signs particular shocks. It shown such qualitative (sign-)proxies can lead to impulse response estimates impact effects interest are nearly as efficient even more than estimators based on quantitative also reflect shock. Moreover, sign-proxies tend provide precise an approach merely higher volatility shocks event dates.