Disentangling demand and supply shocks in the crude oil market: How to check sign restrictions in structural VARs

Arbeitspapier

Given the growing dissatisfaction with exclusion and long-run restrictions in structural vector autoregressive analysis, sign restrictions are becoming increasingly popular. So far there are no techniques for validating the shocks identified via such restrictions. Although in an ideal setting the sign restrictions specify shocks of interest, sign restrictions may be invalidated by measurement errors, data adjustments or omitted variables. We model changes in the volatility of the shocks via a Markov switching (MS) mechanism and use this devise to give the data a chance to object to sign restrictions. The approach is illustrated by considering a small model for the market of crude oil.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1195

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Energy and the Macroeconomy
• Subject: Markov switching model ; vector autoregression ; heteroskedasticity ; rude oil market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lütkepohl, Helmut ; Netsunajev, Aleksei
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/61422
• Last update: 10.03.2025, 11:43 AM CET