Structural Panel VARs

Structural Panel VARs

The paper proposes a structural approach to VAR analysis in panels, which takes into account responses to both idiosyncratic and common structural shocks, while permitting full cross member heterogeneity of the response dynamics. In the context of this structural approach, estimation of the loading matrices for the decomposition into idiosyncratic versus common shocks is straightforward and tra...

Efficient Inference in Non-Gaussian Structural VARs

Opening the Black Box: Structural Factor Models versus Structural VARs

In this paper we study identification in dynamic factor models and argue that factor models are better suited than VARs to provide a structural representation of the macroeconomy. Factor models distinguish measurement errors and other idiosyncratic disturbances from structural macroeconomic shocks. As a consequence, the number of structural shocks is no longer equal to the number of variables i...

Testing for Sufficient Information in Structural VARs*

We derive necessary and sufficient conditions under which a set of variables is informationally sufficient, i.e. it contains enough information to estimate the structural shocks with a VAR model. Based on such conditions, we suggest a procedure to test for informational sufficiency. Moreover, we show how to amend the VAR if informational sufficiency is rejected. We apply our procedure to a VAR ...

Are Policy Counterfactuals Based on Structural VARs Reliable?∗

Based on standard New Keynesian models I show that policy counterfactuals based on the theoretical structural VAR representations of the models fail to reliably capture the impact of changes in the parameters of the Taylor rule on the (reduced-form) properties of the economy. Based on estimated models for the Great Inflation and the most recent period, I show that, as a practical matter, the pr...