Non-Invertibilities and Structural VARs

  title={Non-Invertibilities and Structural VARs},
  author={Eric R. Sims},
This paper sheds light on how important non-invertibilities are for applied work with structural vector autoregressions (VARs). Non-invertibilities arise when important state variables from a dynamic economic model are unobserved by an econometrician estimating a VAR. The non-observation of the full state vector may drive a wedge between the VAR innovations and the economic shocks, potentially invalidating conclusions drawn from structural impulse response analysis. This paper shows that… CONTINUE READING

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