A simple instrument for proxy vector autoregressive analysis

Lukas Boer and Helmut Lütkepohl

A major challenge for proxy vector autoregressive analysis is the construction of a suitable instrument variable for identifying a shock of interest. We propose a simple proxy that can be constructed whenever the dating and sign of particular shocks are known. It is shown that the proxy can lead to impulse response estimates of the impact effects of the shock of interest that are nearly as efficient as or even more efficient than estimators based on a conventional, more sophisticated proxy.

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Year of publication:	2020
Authors:	Boer, Lukas ; Lütkepohl, Helmut
Publisher:	Berlin : DIW Berlin, German Institute for Economic Research
Subject:	GMM \| heteroskedastic VAR \| instrumental variable estimation \| proxy VAR \| structural vector autoregression \| VAR-Modell \| VAR model \| Schätztheorie \| Estimation theory \| IV-Schätzung \| Instrumental variables \| Momentenmethode \| Method of moments