WHY AGNOSTIC SIGN RESTRICTIONS ARE NOT ENOUGH: UNDERSTANDING THE DYNAMICS OF OIL MARKET VAR MODELS

@inproceedings{Murphy2010WHYAS,
  title={WHY AGNOSTIC SIGN RESTRICTIONS ARE NOT ENOUGH: UNDERSTANDING THE DYNAMICS OF OIL MARKET VAR MODELS},
  author={Daniel Patrick Murphy},
  year={2010}
}
Sign restrictions on the responses generated by structural vector autoregressive models have been proposed as an alternative approach to the use of exclusion restrictions on the impact multiplier matrix. In recent years such models have been increasingly used to identify demand and supply shocks in the market for crude oil. We demonstrate that sign restrictions alone are insufficient to infer the responses of the real price of oil to such shocks. Moreover, the conventional assumption that all… CONTINUE READING

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