Kiel Working Papers, Kiel Institute for World Economics
No 1072:
An Introduction into the SVAR Methodology: Identification, Interpretation and Limitations of SVAR models
Jan Gottschalk
Abstract: This paper aims to provide a non-technical introduction
into the SVAR methodology. Particular emphasize is put on the approach to
identification in SVAR models, which is compared to identification in
simultaneous equation models. It is shown that SVAR models are useful tools
to analyze the dynamics of a model by subjecting it to an unexpected shock,
whereas simultaneous equation models are better suited for policy
simulations. A draw back of the SVAR methodology is that due to the low
dimension of typical SVAR models the assumption that the underlying shocks
are orthogonal is likely to be fairly restrictive.
Keywords: Structural Vector Autoregressions, Identification, Impulse Response Analysis; (follow links to similar papers)
JEL-Codes: C32; C51; (follow links to similar papers)
42 pages, August 2001
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