Hodges–Lehmann Detection of Structural Shocks: An Analysis of Macroeconomic Dynamics in the Euro Area

• Autores: Helmut Herwartz
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 80, Nº. 4, 2018, págs. 736-754
• Idioma: inglés
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• Resumen

  • Structural shocks in multivariate dynamic systems are hidden and often identified with reference to a priori economic reasoning. Based on a non‐Gaussian framework of independent shocks, this work provides an approach to discriminate between alternative identifying assumptions on the basis of dependence diagnostics. Relying on principles of Hodges–Lehmann estimation, we suggest a decomposition of reduced form covariance matrices that yields implied least dependent (structural) shocks. A Monte Carlo study underlines the discriminatory strength of the proposed identification strategy. Applying the approach to a stylized model of the Euro Area economy, independent shocks conform with features of demand, supply and monetary policy shocks.