scholarly journals Choosing Between Different Time-Varying Volatility Models for Structural Vector Autoregressive Analysis

2018 ◽  
Vol 80 (4) ◽  
pp. 715-735 ◽  
Author(s):  
Helmut Lütkepohl ◽  
Thore Schlaak
Keyword(s):  
Time Varying ◽  
Vector Autoregressive ◽  
Volatility Models ◽  
Structural Vector ◽  
Autoregressive Analysis

DOES FEAR LEAD TO RECESSIONS?

2015 ◽  
Vol 20 (5) ◽  
pp. 1247-1263 ◽  
Author(s):  
Shiu-Sheng Chen ◽  
Yu-Hsi Chou
Keyword(s):  
Transition Probability ◽  
Autoregressive Models ◽  
Consumer Confidence ◽  
Time Varying ◽  
Structural Shocks ◽  
Vector Autoregressive Models ◽  
Vector Autoregressive ◽  
Economic Downturns ◽  
Economic Recessions ◽  
Structural Vector

This paper investigates the link between consumer pessimism and U.S. economic recessions empirically. First we use structural vector autoregressive models to identify negative structural shocks to consumer confidence, which are used as a proxy for recession fear. We then apply probit models and time-varying-transition-probability Markov-switching autoregressive models to investigate how the lack of consumer confidence affects the probability of recession. We find that recession fear leads to a higher probability of economic downturns. Furthermore, strong evidence exists that an increase in market pessimism may push the economy from an expansion state to a recession state. We also find weaker evidence suggesting that a lack of consumer confidence may trap the economy in the depressed regime longer. We conclude that a lack of confidence can push the economy into recession.

scholarly journals Testing identification via heteroskedasticity in structural vector autoregressive models

2020 ◽  
Author(s):  
Helmut Lütkepohl ◽  
Mika Meitz ◽  
Aleksei Netšunajev ◽  
Pentti Saikkonen
Keyword(s):  
Covariance Matrices ◽  
Small Sample ◽  
Test Statistics ◽  
Vector Autoregressive Models ◽  
Vector Autoregressive ◽  
Null Distributions ◽  
Small Sample Properties ◽  
Structural Vector ◽  
Autoregressive Analysis ◽  
Time Point

Summary Tests for identification through heteroskedasticity in structural vector autoregressive analysis are developed for models with two volatility states where the time point of volatility change is known. The tests are Wald-type tests for which only the unrestricted model, including the covariance matrices of the two volatility states, has to be estimated. The residuals of the model are assumed to be from the class of elliptical distributions, which includes Gaussian models. The asymptotic null distributions of the test statistics are derived, and simulations are used to explore their small-sample properties. Two empirical examples illustrate the usefulness of the tests in applied work.

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