Sign Restrictions with a New-Keynesian Macro Model: Results From a “Quasi-Agnostic” Identification Procedure

Author: Gregorio Impavido

Sign Restrictions with a New-Keynesian Macro Model

Volume/Issue: Volume 2025 Issue 162

Publication date: August 2025

ISBN: 9798229021593

$20.00

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Topics covered in this book

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Banks and Banking , Inflation , VARs , SVARs , parametric restrictions , sign restrictions , sign restriction procedure , parametric restriction , acceptance rate , standard deviation demand shock , output gap response , price puzzle , Structural vector autoregression , Output gap , Inflation , Central bank policy rate , Neoclassical theory

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Summary

This paper proposes a “quasi-agnostic” sign restriction procedure to identify structural shocks in frequentist structural vector autoregression (SVAR) models. It argues that low acceptance rates, inherent to agnostic sign restriction procedures, are not necessarily an indication of model misspecification. They can be low because agnostic procedures fail to exploit the ex ante priors on the sign of responses of macro variables to structural shocks.