Estimation of structural impulse responses: short-run versus long-run identifying restrictions
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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.
KeywordsImpulse responses Structural vector autoregressive model Long-run multipliers Short-run multipliers
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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