Identifying Structural VARs with a Proxy Variable and a Test for a Weak Proxy∗

  • Kurt G. Lunsford
  • Published 2015

Abstract

This paper develops a simple estimator to identify structural shocks in vector autoregressions (VARs) by using a proxy variable that is correlated with the structural shock of interest but uncorrelated with other structural shocks. When the proxy variable is weak, modeled as local to zero, the estimator is inconsistent and converges to a distribution. This… (More)

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