Bastien Buchwalter, Francis X. Diebold, Kamil Yilmaz
arXiv 10 Sep 2026 · Econometrics
arXiv:2609.12280 · PDF · Extracted main text
Identification in vector autoregressions involves two distinct choices: how extensively to orthogonalize shocks and whether orthogonality is imposed sequentially or simultaneously. Generalized identification imposes no orthogonality; Sims (1980} imposes full orthogonality sequentially; Francis et al. (2026) impose full orthogonality simultaneously; and Buchwalter et al. (2026a) provide clustered partial orthogonalization sequentially. We fill the remaining case by developing simultaneous clustered orthogonalization (SCO). SCO preserves contemporaneous dependence within economically meaningful clusters while imposing orthogonality across clusters jointly, thereby eliminating dependence on cluster ordering. We formulate the associated correlation-maximizing identification problem and show that, in correlation space, it reduces to a quadratic matrix equation. This yields a closed-form solution, and we prove that the associated identification matrix is the unique global maximizer. SCO is order- and scale-invariant and nests generalized identification and full simultaneous orthogonalization as special cases, yielding a flexible family of structural decompositions indexed by the number and composition of clusters.
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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 | Francis, N., P. R. Hansen, and C. Tong (2026) Principled identification of structural dynamic models | 1.000 | 12 | 7 | 100% |
| 2 | Buchwalter, B., F. X. Diebold, and K. Yilmaz (2026) Clustered network connectedness: A new measurement framework with application to global equity markets self | 1.000 | 10 | 5 | 100% |
| 3 | Koop, G., M. H. Pesaran, and S. M. Potter (1996) Impulse response analysis in nonlinear multivariate models | 1.000 | 5 | 4 | 100% |
| 4 | Pesaran, M. H. and Y. Shin (1998) Generalized impulse response analysis in linear multivariate models | 1.000 | 5 | 4 | 100% |
| 5 | Sims, C. A (1980) Macroeconomics and reality | 0.737 | 3 | 2 | 100% |
| 6 | Buchwalter, B., F. X. Diebold, and K. Yilmaz (2026) Scalable clustered network connectedness with control variables: Theory and application to global banking self | 0.644 | 2 | 2 | 100% |
| 7 | Diebold, F. X. and K. Yilmaz (2012) Better to give than to receive: Predictive directional measurement of volatility spillovers self | 0.405 | 1 | 1 | 100% |
| 8 | Diebold, F. X. and K. Ylmaz (2014) On the network topology of variance decompositions: Measuring the connectedness of financial firms self | 0.405 | 1 | 1 | 100% |
| 9 | Forbes, K. J. and R. Rigobon (2002) No contagion, only interdependence: measuring stock market comovements | 0.405 | 1 | 1 | 100% |
| 10 | Karush, W (1939) Minima of functions of several variables with inequalities as side conditions | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 11 scored citations.