Working Paper: CEPR ID: DP5725
Authors: Domenico Giannone; Lucrezia Reichlin
Abstract: This paper asks two questions. First, can we detect empirically whether the shocks recovered from the estimates of a structural VAR are truly structural? Second, can the problem of non-fundamentalness be solved by considering additional information? The answer to the first question is 'yes' and that to the second is 'under some conditions'.
Keywords: Identification; Information; Invertibility; Structural VAR
JEL Codes: C32; C33; E00; E32; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Structural VAR estimation (C51) | Empirical detection of structural shocks (C22) |
| Moving average component in structural model (C22) | Nonfundamentalness (D52) |
| Additional information (Y50) | Solve nonfundamentalness problem (D59) |
| Sectoral data inclusion (E01) | Detection of nonfundamentalness (C52) |
| Technology shocks on hours worked (J29) | Non-structural identification using aggregate variables (C29) |
| Sectoral information inclusion (L52) | Significant response of hours worked to technology shocks (J29) |
| Auxiliary variables (C39) | Enhanced recovery of structural shocks (C22) |