Towards Understanding the Normalization in Structural VAR Models

Kociecki, Andrzej (2013): Towards Understanding the Normalization in Structural VAR Models.

Abstract

The aim of the paper is to study the nature of normalization in Structural VAR models. Noting that normalization is the integral part of identification of a model, we provide a general characterization of the normalization. In consequence some the easy–to–check conditions for a Structural VAR to be normalized are worked out. Extensive comparison between our approach and that of Waggoner and Zha (2003a) is made. Lastly we illustrate our approach with the help of five variables monetary Structural VAR model.

• Item Type: MPRA Paper
• Language: English
• Keywords: Normalization, Identification, Impulse Response Function
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation

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