Higher-order moment inequality restrictions for SVARs

We introduce a method that exploits some non-Gaussian features of structural shocks to identify structural vector autoregression (SVAR) models. More specifically, we propose combining inequality restrictions on the higher-order moments of the structural shocks of interest with other set-identifying constraints, typically sign restrictions. We illustrate how, in both large and small sample settings, higher-order moment restrictions considerably narrow the identification of monetary policy shocks compared with what is obtained with minimal sign restrictions typically used in the SVAR literature. The proposed methodology also provides new insights into the macroeconomic effects of sovereign risk in the euro area as well as the transmission of geopolitical risk to the US economy.