We provide necessary and sufficient conditions for the identification of Structural Vector Autoregressions (SVARs) with external instruments considering the case in which r instruments are used to identify g structural shocks of interest, r>=g >=1. Novel frequentist estimation methods are discussed by considering both a `partial shocks' identification strategy, where only g structural shocks are of interest and are instrumented, and in a `full shocks' identification strategy, where despite g structural shocks are instrumented, all n = g+(n+g) structural shocks of the system can be identified under certain conditions. The suggested approach is applied to empirically investigate whether financial and macroeconomic uncertainty can be approximated as exogenous drivers of U.S. real economic activity, or rather as endogenous responses to first moment shocks, or both. We analyze whether the dynamic causal effects of non-uncertainty shocks on macroeconomic and financial uncertainty are significant in the period after the Global Financial Crisis.

Exogenous uncertainty and the identification of Structural Vector Autoregressions with external instruments

Angelini, Giovanni;Fanelli, Luca
2019

Abstract

We provide necessary and sufficient conditions for the identification of Structural Vector Autoregressions (SVARs) with external instruments considering the case in which r instruments are used to identify g structural shocks of interest, r>=g >=1. Novel frequentist estimation methods are discussed by considering both a `partial shocks' identification strategy, where only g structural shocks are of interest and are instrumented, and in a `full shocks' identification strategy, where despite g structural shocks are instrumented, all n = g+(n+g) structural shocks of the system can be identified under certain conditions. The suggested approach is applied to empirically investigate whether financial and macroeconomic uncertainty can be approximated as exogenous drivers of U.S. real economic activity, or rather as endogenous responses to first moment shocks, or both. We analyze whether the dynamic causal effects of non-uncertainty shocks on macroeconomic and financial uncertainty are significant in the period after the Global Financial Crisis.
2019
Angelini, Giovanni; Fanelli, Luca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/697266
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