The common approach to evaluating a model in the structural VAR literature is to compare the impulse responses from structural VARs run on the data to the theoretical impulse responses from the model. The Sims-Cogley-Nason approach instead compares the structural VARs run on the data to identical structural VARs run on data from the model of the same length as the actual data. Chari, Kehoe, and McGrattan (2006) argue that the inappropriate comparison made by the common approach is the root of the problems in the SVAR literature. In practice, the problems can be solved simply. Switching from the common approach to the Sims-Cogley-Nason ap-proach basically involves changing a few lines of computer code and a few lines of text. This switch will vastly increase the value of the structural VAR literature for economic theory.
- E27 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications
- E32 - Business Fluctuations; Cycles
- C51 - Model Construction and Estimation
- E21 - Macroeconomics: Consumption; Saving; Wealth
- E13 - General Aggregative Models: Neoclassical
- E37 - Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
- C52 - Model Evaluation, Validation, and Selection
- C32 - Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- E17 - General Aggregative Models: Forecasting and Simulation: Models and Applications
- Federal Reserve Bank of Minneapolis. Research Department
- Federal Reserve Bank of Minneapolis
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