Title: Identification of independent structural shocks in the presence of multiple Gaussian components
Authors: Simone Maxand - University of Helsinki (Finland) [presenting]
Abstract: Several recently developed identification techniques for structural VAR models are based on the assumption of non-Gaussianity. So-called independence based identification provides unique structural shocks (up to scaling and ordering) under the assumption of at most one Gaussian component. While non-Gaussianity of certain interesting shocks, e.g., a monetary policy shock, appears rather natural, not all macroeconomic shocks in the system might show this clear difference from Gaussianity. We generalize identifiability by noting that even in the presence of multiple Gaussian shocks the non-Gaussian ones are still unique. Consequently, independence based identification allows to uniquely determine the (non-Gaussian) shocks of interest irrespective of the distribution of the remaining system. In an illustrative macroeconomic model the identified structural shocks confirm the results of previous studies on the early millennium slowdown. Furthermore, extending the time horizon provides full identification under the non-Gaussianity assumption.