Ridge regression is a popular method for dense least squares regularization. In this article, ridge regression is studied in the context of VAR model estimation and inference. The implications of anisotropic penalization are discussed, and a comparison is made with Bayesian ridge‐type...

All parameters in structural vector autoregressive (SVAR) models are locally identified when the structural shocks are independent and follow non-Gaussian distributions. Unfortunately, standard inference methods that exploit such features of the data for identification fail to yield correct...