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Abstract This paper discusses the problems associated with using information about the signs of certain magnitudes as a basis for drawing structural conclusions in vector autoregressions. We also review available… Click to show full abstract
Abstract This paper discusses the problems associated with using information about the signs of certain magnitudes as a basis for drawing structural conclusions in vector autoregressions. We also review available tools to solve these problems. For illustration we use Dahlhaus and Vasishtha’s (2019) study of the effects of a U.S. monetary contraction on capital flows to emerging markets. We explain why sign restrictions alone are not enough to allow us to answer the question and suggest alternative approaches that could be used.
Journal Title: Journal of International Money and Finance
Year Published: 2020
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