This work was supported by Inha University Research Grant. I thank Masao Ogaki for the guidance and S.D. Lee for comments. I also thank two anonymous referees and seminar participants at the 2004 Far Eastern Econometric Society Meeting for valuable comments. I am completely responsible for any remaining errors and deficiencies.
Alternative Maximum Likelihood Estimation of Structural Vector Autoregressive Models Partially Identified with Short-Run Restrictions
Article first published online: 17 MAR 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 2-3, pages 465–476, March-April 2013
How to Cite
JANG, K. (2013), Alternative Maximum Likelihood Estimation of Structural Vector Autoregressive Models Partially Identified with Short-Run Restrictions. Journal of Money, Credit and Banking, 45: 465–476. doi: 10.1111/jmcb.12010
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
- Received January 11, 2006; and accepted in revised form March 6, 2012.
- ML estimation;
- VAR model;
- monetary policy;
- exchange rate
This paper presents an alternative maximum likelihood estimation method for partially identified vector autoregressive models. This method might be especially useful to handle very large systems of variables by reducing the dimension of the likelihood space. As an application, we consider an open economy model to investigate the effects of monetary policy on exchange rates and term structures. We find that exchange rates tend to overshoot and term structures have hump-shaped responses to monetary policy shocks.