Brown Bag Seminar - Tomasz Woźniak (University of Melbourne)

Title: Verifying Sources of Identification in Structural VARs using the BETEL Framework

Abstract: We employ a spike’n’slab prior distribution to discriminate between moment conditions identifying a fiscal policy structural vector autoregression. Various sources of identification, including instrumental variables as well as symmetric and asymmetric kurtosis, are presented as moment conditions informing the estimation of the structural parameters. Exclusion restrictions are also considered. The spike’n’slab prior is used to verify these conditions within a single MCMC run. We use a three-variable system for the US fiscal policy analysis to show that the structural parameters are identified thanks to the non-normal innovations and exclusion restrictions rather than via instruments or heteroskedasticity.