Kiel Working Papers, Kiel Institute for World Economics
No 1068:
Do Bivariate SVAR Models with Long-Run Identifying Restrictions Yield Reliable Results? The Case of Germany
Jan Gottschalk and Willem Van Zandweghe
Abstract: Bivariate SVAR models employing long-run identifying
restrictions are often used to investigate the source of business cycle
fluctuations. Their advantage is the simplicity in use and interpretation.
However, their low dimension may also lead to a failure of the
identification procedure, with the result that the identified shocks are a
mixture of the true shocks. To investigate this issue, we evaluate for
German data the consistency of results from different bivariate SVAR models
employing the same long-run identifying restrictions. We find that these
models do not offer reliable evidence on the sources of output
fluctuations.
Keywords: Business Cycle Fluctuations, Structural Vector Autoregression Models, Long-run Restrictions; (follow links to similar papers)
JEL-Codes: E32; C32; (follow links to similar papers)
52 pages, August 2001
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