To date, the methods that have been used are only justified from a Bayesian perspective. This paper develops methods of constructing error bands for impulse response functions of sign-restricted SVARs that are valid from a frequentist perspective. The authors also provide a comparison of frequentist and Bayesian error bands in the context of an empirical application — the former can be twice as wide as the latter.View the Full Working Paper
Inference for VARs Identified with Sign Restrictions
WP 11-20 - There is a fast growing literature that partially identifies structural vector autoregressions (SVARs) by imposing sign restrictions on the responses of a subset of the endogenous variables to a particular structural shock (sign-restricted SVARs).