Structural Inference With Long-Run Recursive Empirical Models

Abstract

This paper investigates conditions under which a long-run recursive model can be used to identify a structure. Economists frequently employ this type of empirical model. I define the class of long-run partially recursive structures. If an economic system is a member of this class, then certain long-run recursive empirical models will obtain some of the structural impulse response functions. This sufficient condition for a structure is first shown in a vector autoregression. A well-known example from the literature is used to illustrate this particular class of structures and to present some useful applications of the result. Then the result is shown in models of cointegrated time series. Necessary conditions for a long-run recursive model to identify structure are addressed in the conclusion.

The Effects of Monetary Policy Shocks: Comparing Contemporaneous versus Long-Run Identifying Restrictions

“…Since the Choleski decomposition attributes all of the correlation between two variables to the one higher in the ordering, one can impose neutrality restrictions by placing real variables prior to the monetary policy variable in a Choleski decomposition of the long-run relations among the variables. This is demonstrated in Keating (1999).…”

“…Other interpretations of the ordering are, no doubt, possible. For a discussion of the conditions under which long-run recursive structures like that employed here identify structural shocks, see Keating (1999).…”

Alternative Maximum Likelihood Estimation of Structural Vector Autoregressive Models Partially Identified with Short‐Run Restrictions

“…Alternatively, y 1 t does not respond to a monetary policy shock contemporaneously, while y 3 t does. See Christiano, Eichenbaum, and Evans (1999) and Keating (1996, 2002) for an extended theoretical background. Throughout this paper, we assume that the second block of parameters and shocks is of interest given the following block recursive assumption:…”

Implications of Endogenous Money Growth for Some Tests of Superneutrality and the Fisher Effect

“…This is because a recursive model is unique.Hamilton (1994, p. 91) provides a proof of this claim.26 There exists a class of structures that permit the long-run recursive model to identify responses for a subset of structural shocks. For more details, seeKeating (2002).…”