Use this identifier to quote or link this document:

Frequency-Domain Estimation as an Alternative to Pre-Filtering External Cycles in Structural VAR Analysis
Lovcha, Yuliya; Pérez Laborda, Alejandro
Universitat Rovira i Virgili. Departament d'Economia
This paper shows that the frequency domain estimation of VAR models over a frequency band can be a good alternative to pre-filtering the data when a low-frequency cycle contaminates some of the variables. As stressed in the econometric literature, pre-filtering destroys the low-frequency range of the spectrum, leading to substantial bias in the responses of the variables to structural shocks. Our analysis shows that if the estimation is carried out in the frequency domain, but employing a sensible band to exclude (enough) contaminated frequencies from the likelihood, the resulting VAR estimates and the impulse responses to structural shocks do not present significant bias. This result is robust to several specifications of the external cycle and data lengths. An empirical application studying the effect of technology shocks on hours worked is provided to illustrate the results. Keywords: Impulse-response, filtering, identification, technology shocks. JEL Classification: C32, C51, E32, E37
33 - Economia
Previsió econòmica
Models economètrics
Cicles econòmics
L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons:
33 p.
Working Paper
Universitat Rovira i Virgili. Centre de Recerca en Economia Industrial i Economia Pública
Documents de treball del Departament d'Economia;2016-30

Full text files in this document

Files Size Format
201630.pdf 11.17 MB PDF

Show full item record