arXiv 27 Sep 2017 · Econometrics
arXiv:1709.09583 · PDF · DOI · OpenAlex · Extracted main text
In many macroeconomic applications, confidence intervals for impulse responses are constructed by estimating VAR models in levels - ignoring cointegration rank uncertainty. We investigate the consequences of ignoring this uncertainty. We adapt several methods for handling model uncertainty and highlight their shortcomings. We propose a new method - Weighted-Inference-by-Model-Plausibility (WIMP) - that takes rank uncertainty into account in a data-driven way. In simulations the WIMP outperforms all other methods considered, delivering intervals that are robust to rank uncertainty, yet not overly conservative. We also study potential ramifications of rank uncertainty on applied macroeconomic analysis by re-assessing the effects of fiscal policy shocks.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Blanchard, O. and R. Perotti (2002) An empirical characterization of the dynamic effects of changes in government spending and taxes on output | 1.000 | 9 | 3 | 100% |
| 2 | Mikusheva, A (2012) One-dimensional inference in autoregressive models with the potential presence of a unit root | 1.000 | 5 | 3 | 100% |
| 3 | Kilian, L (1998) Accounting for lag order uncertainty in autoregressions: the endogenous lag order bootstrap algorithm | 0.928 | 4 | 3 | 100% |
| 4 | Phillips, P. C. B (1998) Impulse response and forecast error variance asymptotics in nonstationary VARs | 0.928 | 4 | 3 | 100% |
| 5 | Berk, R., L. Brown, A. Buja, K. Zhang, and L. Zhao (2013) Valid post-selection inference | 0.928 | 4 | 3 | 100% |
| 6 | Johansen, S (1995) Likelihood-Based Inference in Cointegrated Vector Autoregressive Models | 0.920 | 9 | 4 | 78% |
| 7 | Ramey, V. A (2011) Identifying government spending shocks: It's all in the timing | 0.874 | 12 | 2 | 100% |
| 8 | Mertens, K. and M. O. Ravn (2014) A reconciliation of SVAR and narrative estimates of tax multipliers | 0.874 | 10 | 2 | 100% |
| 9 | Mountford, A. and H. Uhlig (2009) What are the effects of fiscal policy shocks? | 0.874 | 8 | 2 | 100% |
| 10 | Cavaliere, G., A. Rahbek, and A. M. R. Taylor (2012) Bootstrap determination of the co-integration rank in vector autoregressive models | 0.874 | 5 | 2 | 100% |
Showing the top 10 of 132 scored citations.