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Are structural vector autoregressions (VARs) useful for discriminating between macro models‘ Recent assessments of VARs have shown that these statistical methods have adequate size properties. In other words, in simulation exercises, VARs will only infrequently reject the true data generating...
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Financial shocks represent a major driver of fluctuations in tail risk, defined as the 5th percentile of the forecast distributions of output and inflation. Since the variance and the asymmetry of the forecast distributions are largely driven by the left tail, financial shocks turn out to play a...
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uncertainty and skewness. Embedding these measures in a VAR framework, we show that unexpected changes in uncertainty are … associated with an increase in (left) skewness and a downturn in real activity. Empirical findings related to VAR impulse … response of skewness to uncertainty shocks shows that skewness substantially amplifies the recessionary effects of uncertainty. …
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We exploit inequality restrictions on higher-order moments of the distribution of structural shocks to sharpen their identification. We show that these constraints can be treated as necessary conditions and used to shrink the set of admissible rotations. We illustrate the usefulness of this...
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