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Choosing between identification schemes in noisy-news models

Choosing between identification schemes in noisy-news models AbstractThis paper is about identifying structural shocks in noisy-news models using structural vector autoregressive moving average (SVARMA) models. We develop a new identification scheme and efficient Bayesian methods for estimating the resulting SVARMA. We discuss how our identification scheme differs from the one which is used in existing theoretical and empirical models. Our main contributions lie in the development of methods for choosing between identification schemes. We estimate specifications with up to 20 variables using US macroeconomic data. We find that our identification scheme is preferred by the data, particularly as the size of the system is increased and that noise shocks generally play a negligible role. However, small models may overstate the importance of noise shocks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Choosing between identification schemes in noisy-news models

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References (43)

Publisher
de Gruyter
Copyright
© 2020 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2020-0016
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper is about identifying structural shocks in noisy-news models using structural vector autoregressive moving average (SVARMA) models. We develop a new identification scheme and efficient Bayesian methods for estimating the resulting SVARMA. We discuss how our identification scheme differs from the one which is used in existing theoretical and empirical models. Our main contributions lie in the development of methods for choosing between identification schemes. We estimate specifications with up to 20 variables using US macroeconomic data. We find that our identification scheme is preferred by the data, particularly as the size of the system is increased and that noise shocks generally play a negligible role. However, small models may overstate the importance of noise shocks.

Journal

Studies in Nonlinear Dynamics & Econometricsde Gruyter

Published: Mar 28, 2022

Keywords: Bayesian estimation; noise shocks; savage dickey density ratio; structural identification; vector autoregressive moving average models

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