Arbeitspapier
Macroeconomic Responses to Uncertainty Shocks: The Perils of Recursive Orderings
A common practice in empirical macroeconomics is to examine alternative recursive orderings of the variables in structural vector autogressive (VAR) models. When the implied impulse responses look similar, the estimates are considered trustworthy. When they do not, the estimates are used to bound the true response without directly addressing the identification challenge. A leading example of this practice is the literature on the effects of uncertainty shocks on economic activity. We prove by counterexample that this practice is invalid in general, whether the data generating process is a structural VAR model or a dynamic stochastic general equilibrium model.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 10121
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Model Construction and Estimation
Business Fluctuations; Cycles
- Subject
-
Cholesky decomposition
orthogonalization
simultaneity
endogeneity
uncertainty
business cycle
- Event
-
Geistige Schöpfung
- (who)
-
Kilian, Lutz
Plante, Michael D.
Richter, Alexander W.
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2022
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kilian, Lutz
- Plante, Michael D.
- Richter, Alexander W.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2022