How to Advance Theory with Structural VARs : Use the Sims-Cogley-Nason Approach

@inproceedings{Kehoe2006HowTA,
  title={How to Advance Theory with Structural VARs : Use the Sims-Cogley-Nason Approach},
  author={Patrick J. Kehoe},
  year={2006}
}
The common approach to evaluating a model in the structural VAR literature is to compare the impulse responses from structural VARs run on the data to the theoretical impulse responses from the model. The Sims-Cogley-Nason approach instead compares the structural VARs run on the data to identical structural VARs run on data from the model of the same length as the actual data. Chari, Kehoe, and McGrattan (2006) argue that the inappropriate comparison made by the common approach is the root of… CONTINUE READING