Testing for Sufficient Information in Structural VARs

Mario Forni · Luca Gambetti Z

18 citations0/0 files storedRePEc: Research Papers in Economics

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Monetary Policy and Economic Impact Economic Growth and Productivity Unemployment and Economic Growth

Abstract

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 including TFP, unemployment and per-capita hours worked. We find that the three variables are not informationally sufficient. When adding missing information, the effects of technology shocks change dramatically.

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References

2008Are Structural VARs with Long-Run Restrictions Useful in Developing Business Cycle Theory?2006Does Information Help Recovering Structural Shocks from past Observations?2006Multivariate out-of-sample tests for Granger causality 2007Opening the Black Box: Structural Factor Models with Large Cross-Sections

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2020The heterogeneous impact of monetary policy on the US labor market

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