We identify structural vector autoregressive (SVAR) models by combining sign restrictions with information in external instruments and proxy variables. We incorporate the proxy variables by augmenting the SVAR with equations that relate them to the structural shocks. Our modeling framework allows to simultaneously identify different shocks using either sign restrictions or an external instrumen...

The author evaluates the ability of a variety of output-gap estimators to accurately measure the output gap in a model economy. A small estimated model of the Canadian economy is used to generate artificial data. Using output and inflation data generated by this model, the author uses each output-gap estimation methodology to construct an estimate of the true output gap. He then evaluates the m...

In this paper we apply the method of inferred causation for macroeconomic analysis. First we introduce briefly the theory of inferred causation developed by Pearl and Verma (1991). We apply this method to the identification of structural vector autoregression (SVAR) models. In an example of monetary policy analysis we demonstrate how causal information embedded in the data can be used to identi...

This paper investigates changes in the conduct of U.S. monetary policy. Monetary policy is modeled in the context of the Bernanke-Mihov (1998) structural VAR (SVAR) extended to allow explicitly for the Fed’s forward looking behavior. This is achieved by including its realtime forecasts on in‡ation and unemployment (the “Greenbook” forecasts). Stability tests that exploit the SVAR identifying re...

This paper builds a structural VARMA (SVARMA) model for investigating Canadian monetary policy. Despite the support for a VARMA model for monetary policy analysis, the traditional VAR and SVAR models have predominantly been used in the literature mainly due to difficulties associated with the identification and estimation of such a model. Using the scalar component model (SCM) proposed by Athan...

This study examines the nature of competition between the two leading brands of a national small size market by estimating shortand long-term competitive reactions via a Structural VAR (SVAR) model. The primary findings indicate how the two competitors react, which marketing instruments are used, and when competitive reactions affect crossand own-sales. The empirical results suggest that compet...

We explore the use of external instrument SVAR to identify monetary policy shocks. We identify a forward guidance shock as the monetary shock component having zero instant impact on the policy rate. A contractionary forward guidance shock raises both future output and price level, stressing the relative importance of revealing policymakers’ view on future output and price level over committing ...

Under specific parametric assumptions, an n−variable structural vector auto-regression (SVAR) can be identified (up to n! shock orderings) via heteroskedasticity of the structural shocks (Rigobon, 2003, Sentana & Fiorentini, 2001). I show that misspecification of the heteroskedasticity process can bias results derived from these identification schemes. I propose a different method that identifi...