TY  - UNPD
A1  - Kilian, Lutz
A1  - Plante, Michael
A1  - Richter, Alexander W.
T1  - Macroeconomic responses to uncertainty shocks: the perils of recursive orderings
N2  - A common practice in empirical macroeconomics is to examine alternative recursive orderings of the variables in structural vector autogressive (VAR) models. When the implied impulse responses look similar, the estimates are considered trustworthy. When they do not, the estimates are used to bound the true response without directly addressing the identification challenge. A leading example of this practice is the literature on the effects of uncertainty shocks on economic activity. We prove by counterexample that this practice is invalid in general, whether the data generating process is a structural VAR model or a dynamic stochastic general equilibrium model.
T3  - CFS working paper series - No. 687 
KW  - Cholesky decomposition
KW  - orthogonalization
KW  - simultaneity
KW  - endogeneity
KW  - uncertainty
KW  - business cycle
Y1  - 2022
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/68095
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-680950
UR  - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4361693
VL  - November 21, 2022
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -