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The original algorithm contained a mistake that meant the conditional distributions used for the VAR's coefficients were missing a piece of information. We propose a new algorithm that uses the same factorization but includes the missing term. The new, correct algorithm has the same computational complexity as the old, incorrect one (i.e., O(N-4)), and therefore it still allows the estimation of large VARs. (C) 2021 Published by Elsevier B.V.

This paper investigates the economic impact of the 2009 European debt crisis on Saudi Arabia’s real economy from 2004 Q2 to 2014 Q2 using a structural vector autoregressive model (SVAR). The results of the impulse response functions obtained from the aggregated data show that the shock to European imports from Saudi Arabia had a significant impact on the real effective exchange rate, inflation rate, and economic growth that lasted for three periods. Moreover, the variance decomposition analysis shows that Europe’s imports from Saudi Arabia explain approximately 20% of the variance of the Saudi real effective exchange rate and real economic growth, 10% of the interest rate variability, and only 5% of the inflation rate variance. The results of the individual country analysis show that the impact of shocks to imports from all European countries had an instantaneous impact, except for France and Spain, where the impact on the economic growth was significant in the second and sixth periods respectively. The results suggest that Saudi Arabian policymakers should continue the process of export diversification in order to reduce its dependence on this region.

A preprint of the paper is available at https://www.brunel.ac.uk/economics-and-finance/research-and-phd-programmes/research-papers. Copyright © 2021 The Authors. We employ data-based approaches to identify the transmissions of structural shocks among investor attention measured by Google search queries, realised volatilities and trading volumes in the United States, the United Kingdom and the German stock market. The two identification approaches adopted for the structural vector autoregressive analysis are based on independent component analysis and the informational content of disproportional variance changes. Our results show robust evidence that investors' attention affects both volatilities and trading volumes contemporaneously, whereas the latter two variables lack immediate impacts on investors' attention. Some movements in investors' attention can be traced back to market sentiment.

Coronavirus disease (COVID‐19) has already devastated the world, and the economy becomes the most critical challenge for any country worldwide. The increasing uncertainty of the COVID‐19 outbreak has made stock markets in China more turbulent and less predictable. Under the current exceptional circumstances, the hospitality industry suffered the most due to the travel restrictions. This research thus assesses the dynamic relationship among the COVID‐19 outbreak, macroeconomic fluctuations and hospitality stock returns based on a structural VAR framework from 13 January to 11 May 2020, in China. Evidence reveals that macroeconomic fluctuations and hospitality stock returns are significantly affected by shocks from the COVID‐19 outbreak. An unanticipated positive change of the COVID‐19 explosion triggers an addition in exchange rates and causes a reduction in the stock market and hospitality industry returns. For the impacts of the exchange rate, findings reveal that a surprise increase in exchange rates (currency depreciation) exerts a significant negative influence on stock market returns. Additionally, a positive change of stock market returns is linked to a decline in exchange rates and a rise in hospitality industry returns. Therefore, knowledge of these relationships can enable policymakers to evaluate and implement effective policies to stabilize the stock markets and help investors to make appropriate investment strategies.

This paper investigates the impact of unanticipated increases in share prices on economic activity in the G7 countries — Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Share prices contain information about the current and future state of the economy. We investigate whether different measures of optimism, all of which contain the unanticipated increase in share prices, affect key macroeconomic variations. In particular, do bouts of optimism stimulate economic growth? If so, are the economic booms sustained for a long period of time? To answer our research questions, we use structural vector autoregression models, and three different identification strategies. We address the interdependence between interest rate shocks and stock market shocks, using short-run and long-run restrictions, as in Bjørnland and Leitemo (J Monet Econ 56(2): 275–282, 2009). We use pure sign restrictions, as in Uhlig (J Monet Econ 52(2): 381–419, 2005). We also implement the theory and numerical algorithms for zero and sign restrictions, recently developed by Arias et al. (Econometrica 86(2): 685–720, 2018).

We propose to add ranking restrictions on impulse‐responses to sign restrictions to narrow the identified set in vector autoregressions (VARs). Ranking restrictions come from micro data on heterogeneous industries in VARs, bounds on elasticities, or restrictions on dynamics. Using both a fully Bayesian conditional uniform prior and prior‐robust inference, we show that these restrictions help to identify productivity news shocks in the data. In the prior‐robust paradigm, ranking restrictions, but not sign restrictions alone, imply that news shocks raise output temporarily, but significantly. This holds both in an application with rankings in the form of heterogeneity restrictions and in another applications with slope restrictions as rankings. Ranking restrictions also narrow bounds on variance decompositions. For example, the bound of the contribution of news shocks to the forecast error variance of output narrows by about 30 pp at the one‐year horizon. While misspecification can be a concern with added restrictions, they are consistent with the data in our applications. Structural VAR set‐identification sign restrictions ranking restrictions heterogeneity posterior bounds Bayesian inference sampling methods productivity news C32 C53 E32

Using mostly theoretical models and traditional risk/uncertainty measures (VIX index, panic, precaution, scary bad news, etc.), the current literature tries to clarify the risk/uncertainty-deleveraging pattern. The findings are not sufficient to explain the dynamic empirical relationship between modern risk/uncertainty indicators and leverage. We fill this gap in the literature by using US quarterly data, from 1985:1 to 2018:4, Granger causality tests, and a structural vector autoregression model. We find that commercial bank leverage rises when geopolitical risk and macroeconomic, policy, and equity uncertainty increase. Client-based business relationships of banks and high government borrowing from banks during crises periods are responsible for this relationship. We find that the leverage of broker-dealers and shadow banks declines when Chicago risk and macroeconomic, policy, financial, and equity uncertainty increase. We argue that the vulnerability of broker-dealers and shadow banks to the risk/uncertainty of the entire market system is responsible for this relationship., Highlights • Client-based business makes commercial banks less vulnerable to risk and uncertainty. • Commercial bank leverage does not decline when risk and uncertainty increase. • The value of broker-dealer and shadow bank asssets is prone to risk and uncertainty. • Broker-dealer and shadow bank leverage falls significantly when risk/uncertainty rise. • The Fed should provide clear signals about its future actions to prevent deleveraging.

In this study, Japan's LNG import contracts are discussed. Given the importance that these contracts are oil-indexation, the impact of crude oil price volatility (emphasizing OPEC oil basket) on LNG prices was studied using a structural VAR model from January 1997 to October 2017. Also, the Hodrick-Prescott filter was used to separate positive and negative shocks to investigate the effect of oil price shocks on LNG prices. The results showed that the relationship between LNG and crude oil prices has increased over time and that the effect of price shocks was asymmetric so that the impact of positive shocks was more lasting and more significant than negative shocks. This imbalance indicates that the basic oil contracting mechanism generally works to secure sellers' rights. So Japan needs to reform its contracts. Looking at gas sales contracts elsewhere in the world, it seems that the best alternative to current contracts would be the formation of an LNG hub in the North and East Asian region with the focus on Japan or Singapore.

We compute the value of fiscal multipliers (for government primary expenditure, Income and wealth taxes and for Production and import taxes) in the Eurozone countries since the creation of the currency union (2000Q1-2016Q4), in order to understand how the values can vary according to the public debt level, the pace of economic growth, and the output gap. Imposing quarterly fiscal shocks, the results showed that government expenditure had a positive effect on output, with an annual accumulated multiplier of 0.44, whereas tax multipliers presented negative signs: the Income and wealth and the Production and import taxes stood at −0.11 and −0.55, respectively. Furthermore, the spending multiplier showed a higher value for countries with lower levels of public debt, during recessions, and in countries with negative output gaps. On the other hand, tax shocks seemed to be recessive in highly indebted countries and those facing positive output gaps. info:eu-repo/semantics/publishedVersion

Policy makers are increasingly supporting the development of renewable electricity power generation projects not only for environmental concerns but also for economic reasons. Several studies have indeed documented that renewable electricity can be a viable economic alternative to electricity power generation based on non-renewable sources. Yet, most of the existing studies are based on microeconomic cost-benefit analyses which disregard the existence of large macroeconomic effects. This paper develops a novel method to evaluate the macroeconomic impact of renewable electricity power generation projects. Economic theory is used to identify the potential effects of these projects on the vector of macroeconomic variables affected by their implementation. A structural vector autoregression model is thus estimated using a novel dataset of quarterly macroeconomic and energy data for Portugal. The estimated impulse-response functions suggest that renewable electricity power generation projects have positive effects on real economic growth in the medium run, through both the investment and the operations phases. Import substitution is the key driver of the overall positive impact.

We use stock market returns and a new, weekly available, GDP tracker to estimate a structural VAR identified with long-run restrictions. We find that global ‘news’ contribute more than local ‘news’ shocks to explaining the recent variance of equity returns from developing and small developed countries. Since data do not (yet) point to an increase in financial integration during the current pandemic, our investigations support the alternative that these markets hold too optimistic views on their prospects and future ties with the global economy.

Since the beginning of the 21st century, many Latin American countries have been ruled by governments characterized as populist (the so-called new Latin American Left). We focus on the macroeconomic implications of the policies adopted by these governments (instead of their leaders’ rhetoric) and we investigate to what extent this characterization holds. In particular, we focus on their wage policies by doing a Structural Vector Autoregressive analysis and assuming that populist shocks have no long-run effects on real wages. This identification implies that populist leaders prioritize redistribution through nominal wages disregarding the evolution of productivity. The results indicate that economic populism is not as widespread as previously thought. Instead, our approach leads to more nuanced results: while we find that there is populism in Argentina, the results for Brazil, Bolivia and Ecuador show only sporadic populist events. In the remaining countries, we do not find persistent economic populism. ‘‘La Caixa’’ Foundation, under agreement LCF/PR/PR13/51080004. AEI/FEDER grant ECO2017-85763-R.

With its America First strategy, the former US administration turned away from an internationally oriented trade policy. It attempted to assert its interests, especially vis-à-vis China, with bilateral and mostly restrictive measures such as import tariffs. This Weekly Report shows that the costs of such a strategy are immense, at least in the medium-term analysis conducted: Almost all US industries were negatively affected by the US trade policy. This effect can be seen in the forward-looking financial markets, which anticipate the possible effects of tariff changes. Stock prices declined significantly and the US dollar exchange rate rose as a result of the increasing uncertainty. Beyond this, the measures against China also negatively affect the leading stock indices of many other countries. China’s retaliatory measures put additional pressure on US companies. As few firms profit in this situation, the rationale for a restrictive trade policy cannot be based in economic gains. While the current administration is still maintaining a restrictive trade policy as of July 2021, this study shows that a broad return to a multilaterally oriented trade policy is in the interest of most market participants., DIW Weekly Report

El Niño Southern Oscillation (ENSO) is a naturally occurring phenomenon that affects weather around the world. Past ENSO episodes have had severe impacts on the economy of Colombia. We study the influence of ENSO on Colombian coffee production, exports, and price. Our structural econometric specification is consistent with an economic model of the market for Colombian coffee which, in the short run, is characterized by a downward-sloping demand curve and by a vertical supply curve. We show that El Niño (i.e., positive shocks to ENSO) is beneficial for Colombian production and exports and decreases the real price of Colombian coffee. On the contrary, La Niña (i.e., negative shocks to ENSO) depresses Colombian coffee production and exports and increases price. However, the overall impact of ENSO shocks is small. Both in the short run and in the long run, shocks to international demand for Colombian coffee are more relevant than supply-side shocks in Colombia in explaining the dynamics of the price of Colombian coffee. Our results suggest that a given coffee price shock can have beneficial, detrimental, or negligible effects on the Colombian economy, depending on its underlying cause. As a consequence, policy responses to coffee price shocks should be designed by looking at the causes of the shocks.

In this article, we use Structural VAR analysis to disentangle credit demand and supply shocks and their effect on real economic activity in Italy during the 2008 to 2014 crisis period. The three endogenous variables considered are the loan interest rate, the loans growth rate and the employment to population ratio. The data are observed at annual frequency for each of 103 Italian provinces. The empirical evidence suggests that the variance of the shocks varies across four Italian macro-regions: North, Centre, South and Islands, and hece heteroscedasticity is used to identify (ex ante) the structural shocks. Sign restrictions are used to interpret shocks ex post. The empirical findings suggest a prominent role of credit supply shock in shaping real activity dynamics and also that credit crunch hits the North of Italy less than the remaining macro-regions, especially the South of Italy.

Various structural characteristics of economies, directly or indirectly, affect the transmission from government stimuli to economic activity and determine the size of fiscal multipliers. In this article, we expand the standard Blanchard–Perotti fiscal SVAR model by incorporating the public debt and trade openness variables to assess the influence of these structural determinants on the effectiveness of fiscal spending in three selected former Yugoslav countries – Slovenia, Croatia and Serbia. The results confirmed the main hypotheses, which state that public debt level and trade openness significantly affect the effectiveness of fiscal spending through the means of reduction in size of fiscal effects in all countries analysed. When comparing internationally, this reduction tends to be more evident in countries with a higher degree of average public debt level and trade openness.

This paper investigates how the ordering of variables affects properties of the time-varying covariance matrix in the Cholesky multivariate stochastic volatility model. It establishes that systematically different dynamic restrictions are imposed when the ratio of volatilities is time-varying. Simulations demonstrate that estimated covariance matrices become more divergent when volatility clusters idiosyncratically. It is illustrated that this property is important for empirical applications. Specifically, alternative estimates on the evolution of U.S. systematic monetary policy and in ation-gap persistence indicate that conclusions may critically hinge on a selected ordering of variables. The dynamic correlation Cholesky multivariate stochastic volatility model is proposed as a robust alternative.

This paper introduces structural VAR analysis as a tool for investigating the anchoring of inflation expectations. We show that U.S. consumers’ inflation expectations are anchored in the long run because macro-news shocks are long-run neutral for long-term inflation expectations. The identification of structural shocks helps to explain why inflation expectations deviate from the central bank’s target in the short run. Our results indicate that the recent decline of long-term inflation expectations does not result from deanchoring macro-news but can be attributed to downward adjustments of consumers’ expectations about the central bank’s inflation target.

We examine the possible interactions of the financial cycle and fiscal position for G7 economies. We employ the innovative aggregate financial and fiscal stress indexes which are able to depict the perplexed nature of modern economies. A SVAR model is developed to investigate the effects of both financial and fiscal stress on key macroeconomic variables. The results, using two different identification methods, reveal that financial and fiscal shocks affect negatively the key macroeconomic variables. Additionally, there is a weak feedback effect from a financial shock to fiscal sector and vice versa.

The Policy Mix is often defined as the interaction between monetary policy and fiscal policy. These two policies are instruments of economic policy with the main objectives; full employment and lute against inflation. In this context, this paper will be devoted to the study of the interaction between monetary policy and fiscal policy in Tunisia, in order to clear the optimal policy mix for the Tunisian economy that would be able to solve the issues of unemployment and economic growth witnessed by Tunisia in recent years and especially bring our country out of the economic situation of “liquidity trap”. Thus, from the Structural VAR model, we were able to identify the effectiveness of expansionary fiscal policy in Tunisia. Indeed, an expansionary fiscal policy is accompanied instantly by a monetary policy to control inflation and by a short-term increase in the level of production due to the low mobility of capital in our country. The results also show that monetary and fiscal policies in Tunisia are crossed, indeed expansionary fiscal policy led to an intervention by the monetary authorities to increase the interest rates and consequently to implement a restrictive monetary policy.

This study operationalizes the Optimum Currency Area (OCA) to investigate the preparedness of Economic Community of West African States (ECOWAS) members to form a Monetary Union (MU). Inflation and output models are estimated, with the sample 1988:01 to 2017:12 for the former and 1967 to 2016 for the latter. Analyses of ECOWAS convergence criteria, impulse responses, variance decompositions and correlations of shocks of these two models, reveal that the shocks across the ECOWAS members are asymmetric. The conclusion is that ECOWAS members as a whole are not well-prepared and therefore a full-fledged pan-ECOWAS MU is not advisable. It is also found that members of the European Monetary Union (EMU) tend to be a better fit for OCA than the ECOWAS members. The study recommends various courses of action such as fostering coordination among Central Banks of ECOWAS members, and providing a fund to serve as an incentive for countries that may incur cost rather than benefit if the single currency is created. LA MONEDA COMÚN DE LA ECOWAS: ¿CUÁN PREPARADOS ESTÁN SUS MIEMBROS?RESUMENUtilizamos el Área Monetaria Óptima (AMO) para indagar cuán preparados están los miembros de la Comunidad Económica de Estados de África Occidental (ECOWAS, Economic Community of West African States) para formar una Unión Monetaria (UM). Estimamos modelos de inflación y producto con datos de 1988:01-2017 y 1967-2016 respectivamente. Los análisis de criterios de convergencia, impulso-respuesta, descomposición de varianza y correlación de choques de estos modelos revelan que los choques entre estos países son asimétricos. Concluimos que estos países no están bien preparados y, por tanto, una UM pan-ECOWAS no es aconsejable. Además, los integrantes de la Unión Monetaria Europea (UME) tienden a satisfacer mejor una AMO que los de ECOWAS. Nuestro análisis recomienda fortalecer la coordinación entre los bancos centrales de la ECOWAS y un fondo que incentive a los países que incurran en costos en lugar de beneficios si se crea la moneda única.

A lack of economic convergence among euro member countries seems to be feeding euro-skepticism. Using a Structural Vector Auto Regression model combined with a time varying correlation analysis, we attempt to test the endogeneity theory for the three core euro members, i.e., France, Germany, and Italy. We provide evidence that the adoption of the euro has increased the symmetry of underlying shocks and accelerated the convergence process within this group. Even though the global crisis of 2007~2009 disturbed the European convergence process, the expected endogeneity effects continue to be generated, and the euro-skepticism is not corroborated.

We propose an extension of structural fractionally integrated vector autoregressive models that avoids certain undesirable effects on the impulse responses that occur if long-run identification restrictions are imposed. We derive the model’s Granger representation and investigate the effects of long-run restrictions. Simulations illustrate that enforcing integer integration orders can have severe consequences for impulse responses. In a system of U.S. real output and aggregate prices, the effects of structural shocks strongly depend on the specification of the integration orders. In the statistically preferred fractional model, shocks that are typically interpreted as demand disturbances have a very brief influence on GDP. Supplementary materials for this article are available online.

We analyse the dynamics of the standard deviation of demand and supply shocks as well as of the demand component of GDP across countries in the European Monetary Union (EMU). This analysis allows us to evaluate the patterns of cyclical comovement in EMU and compare them the cyclical performance of the new members of the EU and other OECD countries. We make use of sigma-convergence methods to identify synchronization patterns in business cycles. The Eurozone has converged to a stable lower level of dispersion across business cycles during the end of the 80s and the beginning of the 90s. The new EU members have also experienced a strong pattern of convergence from 1998 to 2005, when a strong divergence trend appears. An enlargement of the EMU to 22 members would not significantly decrease its optimality as a currency area. There is evidence for some Europe-specific characteristics as compared to global comovements in business cycles. (authors' abstract)

Oil price shocks and economic policy uncertainty are interrelated and influence stock market return. For the U.S. an unanticipated increase in policy uncertainty has a significant negative effect on real stock returns. A positive oil-market specific demand shock (indicating greater concern about future oil supplies) significantly raises economic policy uncertainty and reduces real stock returns. The direct effects of oil shocks on real stock returns are amplified by endogenous policy uncertainty responses. Economic policy uncertainty and oil-market specific demand shock account for 19% and 12% of the long-run variability in real stock returns, respectively. As a robustness check, (domestic) economic policy uncertainty is shown to also significantly influence real stock returns in Europe and in energy-exporting Canada.

Increases in the real price of oil not explained by changes in global oil production or by global real demand for commodities are associated with significant increases in economic policy uncertainty and its four components (the volume of newspaper coverage of policy uncertainty, CPI forecast interquartile range, tax legislation expiration, and federal expenditures forecast interquartile range). Oil-market specific demand shocks account for 31% of conditional variation in economic policy uncertainty and 22.9% of conditional variation in CPI forecast interquartile range after 24 months. Positive oil shocks due to global real aggregate demand for commodities significantly reduce economic policy uncertainty. Structural oil price shocks appear to have long-term consequences for economic policy uncertainty, and to the extent that the latter has impact on real activity the policy connection provides an additional channel by which oil price shocks have influence on the economy. As a robustness check, structural oil price shocks are significantly associated with economic policy uncertainty in Europe and energy-exporting Canada.

This paper investigates for the first time the effects of oil demand shocks and oil supply shocks on stock order flow imbalances leading to changes in stock returns. Through the estimation of a structural VAR model, positive oil demand shocks are able to explain almost 36% of the observed variation in the daily average stock order flow imbalances measured by the buy/sell trades ratio; which consequently lead to a negative rather than positive stock returns reaction. In contrast, oil supply shocks exhibit a negative and marginally significant effect on stock order flow imbalances. Our aggregate analysis suggests that positive shocks on stock order flow imbalances are negatively related to stock returns. These effects are stronger for oil-related sectors when compared with the rest of the equities sectors.

International audience; We transpose the Generalized Impulse-Response Function (GIRF) developed by. Koop etal. (1996) to Markov-Switching structural VARs. As the algorithm displays an exponentially increasing complexity as regards the prediction horizon, we use the collapsing technique to easily obtain simulated trajectories (shocked or not), even for the most general representations. Our approach encompasses the existing IRFs proposed in the literature and is illustrated with an applied example on gross job flows. © 2012 Elsevier B.V.

Ekonomik entegrasyonun dünya çapında ivme kazanmasıyla birlikte iktisadi şokların sıklığı artmaya ve etki alanları genişlemeye başlamıştır. Bu şokların ekonomi üzerindeki zararlı etkilerinin yok edilmesi noktasında döviz kuru önemli bir politika aracı olarak kabul edilmektedir. Bu çalışmanın amacı, seçilmiş gelişmekte olan açık ekonomiler olarak tanımlanan Türkiye, Brezilya ve Meksika için döviz kurunun şok emici işlevinin varlığının araştırılmasıdır. Bu amaçla uzun dönem ve kısa dönem kısıtlarının bir kombinasyonunu barındıran yapısal VAR metodolojisi takip edilmiştir. Döviz kuru sadece şoklar asimetrik karaktere sahipse şok emici özellik göstermektedir. Analiz sonuçları uyarınca, Türkiye ve Brezilya için kriz öncesi ve kriz sonrası periyotlarda şokların asimetrik olduğu sonucuna ulaşılmıştır. Meksika’da sadece kriz sonrası arz şokları asimetrik özellik göstermektedir. Söz konusu dönemlerde bu ülkeler için döviz kurunun şok emici işlevi etkindir. Ayrıca döviz kurunun kendi şoklarını yaratmadığı tespit edilmiştir. The frequency and sphere of influence of the economic shocks began to extend with the acceleration of the global economic integration. The exchange rate is regarded as an important policy instrument in terms of the destroying of the harmful effects of these shocks on economy. The aim of this study is to investigate the shock absorber role of the exchange rate in selected open developing economies: Turkey, Brazil, Mexico, In this context, the structural VAR framework with long run and short run restrictions is employed. The exchange rate can behave as an shock absorber only if shocks have asymmetric property. Our study finds that, real shocks in Turkey and Brazil relative to the trading partner have been asymmetric during the both the pre-and post-crisis periods. In Mexico, the exchange rate is a potential shock absorber for only supply shocks in post-crisis period. In this framework, it is found that exchange rate has an efficient shock absorbing role for mentioned countries. Also, it does not breed its own shocks.

We asked a representative sample of European banks to judge messages released by ECB members (from February 1999 to February 2000) in terms of their ambiguity. In this paper, we use our survey to derive a definition of ambiguity and to evaluate ECB communication. A Structural Vector Autoregression model is estimated and the results show that ambiguous messages were able to affect agents’ expectations for a limited period after a speech by ECB members; moreover, they show that ambiguity had temporary effects also on volatility and moved rates away from the policy rate.

Constructing bootstrap confidence intervals for impulse response functions (IRFs) from structural vector autoregression (SVAR) models has become standard practice in empirical macroeconomic research. The accuracy of such confidence intervals can deteriorate severely, however, if the bootstrap IRFs are biased. We document an apparently common source of bias in the estimation of the VAR error covariance matrix which can be easily reduced by a scale adjustment. This bias is generally unrecognized because it only affects the bootstrap estimates of the error variance, not the original OLS estimates. Nevertheless, as we illustrate here, analytically, with sampling experiments, and in an example from the literature, the bootstrap error variance bias can have significant distorting effects on bootstrap IRF confidence intervals. We also show that scale-adjusted bootstrap confidence intervals can be expected to exhibit improved coverage accuracy.

This paper is about to quantify the effect of China's urbanization on greenhouse gas (GHG) emissions by separating the part driven by the economic growth from the whole effect. In order to be accurate to estimate unknown parameters, this paper follows the method of Blanchard & Quah (1989), in which identifying conditions are set by assuming some shocks have no long-term effect on corresponding explained variables. We conclude that 1) Urbanization shock has an inverted hump-shaped effect on GHG emissions, in other words, nowadays the process of China's urbanization has been accompanied with saving energy and reducing emissions; 2) The growth rate of GHG emissions, owning to the GDP shock, can be raised by almost 1.53% annually and the urbanization level approximately contributes to 18% of the change of CO2 emissions based on empirical results; 3) China's emission reductions, in the short run, are actualy in expense of decreasing economic growth and delaying the p rocess of its urbanization.

The expansion of shale gas production since the mid-2000s which is commonly referred to as “shale gas revolution” has had large impacts on global energy outlook. The impact is particularly substantial when it comes to the oil market because natural gas and oil are substitutes in consumption and complements and rivals in production. This paper investigates the price externality of shale gas revolution on crude oil. Applying a structural vector autoregressive model (VAR) model, the effect of natural gas production on real oil price is identified in particular, and then based on the identification, counterfactuals of oil price without shale gas revolution are constructed. We find that after the expansion of shale gas production, the real West Texas Intermediate (WTI) oil price is depressed by 10.22 USD/barrel on average from 2007 to 2017, and the magnitude seems to increase with time. In addition, the period before shale gas revolution is used as a “thought experiment” for placebo study. The results support the hypothesis that real WTI oil price can be reasonably reproduced by our models, and the estimated gap for oil price during 2007–2017 can be attributed to shale gas revolution. The methodology and framework can be applied to evaluate the economic impacts of other programs or policies.

International audience; Ehrmann et al. (2003) proposed an IRF in the frame of Markov-switching structural VARs. Their IRF provides insights on the dynamics within the regime in which the shock occurs. We propose an IRF that captures the global response of the system and illustrate its use with examples.

We use the structural factor model proposed by Forni, Giannone, Lippi and Reichlin (2007) to study the effects of monetary policy. The advantage with respect to the traditional vector autoregression model is that we can exploit information from a large data set, made up of 112 US monthly macroeconomic series. Monetary policy shocks are identified using a standard recursive scheme, in which the impact effects on both industrial production and prices are zero. Such a scheme, when applied to a VAR including a suitable selection of our variables, produces puzzling results. Our main findings are the following. (i) The maximal effect on bilateral real exchange rates is observed on impact, so that the “delayed overshooting” or “forward discount” puzzle disappears. (ii) After a contractionary shock prices fall at all horizons, so that the price puzzle is not there. (iii) Monetary policy has a sizable effect on both real and nominal variables. Such results suggest that the structural factor model is a promising tool for applied macroeconomics.

This article describes the business cycle in Tunisia – in terms of the “ classical cycle ” and the “ growth cycle ”– and characterizes its main regularities . We find that : (1) classical-cycle contraction phases are heterogeneous and triggered mainly by external shocks ; (2) supply shocks, unrelated to demand shocks, are the chief determinant of economic activity fluctuations ; (3) Tunisian growth-cycle regularities differ from those observed in Morocco and Jordan ; (4) the Tunisian growth cycle is weakly synchronized with those of Jordan and Morocco, owing to a strong idiosyncratic component and a low common-shock weight., Cet article se propose d’établir une description du cycle économique en Tunisie - cycle classique (cycle d’affaires) et cycle en déviation (cycle de croissance) - et une caractérisation de ses principales régularités. Les résultats obtenus montrent que (i) Les phases de contraction du cycle classique sont très hétérogènes et sont expliquées par les chocs externes (ii) Les chocs d’offre, indépendants des chocs de demande, dominent la variabilité conjoncturelle de l’activité économique (iii) Les régularités empiriques du cycle de croissance sont, dans l’ensemble, différentes de celles observées au Maroc et en Jordanie (iv). Il existe une faible synchronisation entre le cycle de croissance tunisien et les cycles jordanien et marocain, résultat d’une forte composante idiosynchratique et d’un poids faible des chocs communs., Elachhab Fathi. Décrire le cycle économique en Tunisie. In: Économie & prévision, n°189, 2009-3. pp. 75-92.

If floating exchange rates stabilize shocks rather than create shocks, a country that joins a monetary union or fixes its exchange rate looses a stabilizing mechanism. We use a first difference structural VAR on trade weighted macroeconomic data to study the role of floating exchange rates for five "small open economies" with inflation targets. By including both domestic and foreign variables and using a combination of long and short-run restrictions, we identify asymmetric shocks more carefully than previous studies. Only in Sweden and Canada does the nominal exchange rate appreciate significantly in response to asymmetric demand shocks and depreciate to asymmetric supply shocks. Most exchange rate movements are caused by speculation and are not responses to fundamental shocks. However, these exchange rate shocks have negligible effects on output and inflation. Our findings indicate that exchange rates are neither stabilizing nor destabilizing but may be loosely characterized as disconnected from the rest of the economy.

Over the last two decades, there was a significant increase in the number of countries, which started to pursue an Inflation Targeting monetary policy framework. Since the collapse of the Soviet Union, each of fifteen newly created independent countries started to develop and run their own autonomous monetary policies. Having inherited not well-suited market monetary institutions, the collapse of the system led to the most severe economic downturn in those new states. Kazakhstan has announced about implementation of Inflation Targeting policy in August 2015. At the same time, number of researches show that Inflation Targeting might not work well for developing countries as it is for developed ones due to certain fundamental differences and preconditions that must be met before implementation phase. Thus, discussing the case of Kazakhstan as a classical emerging market economy example, examining its ability to respond on various external shocks and identifying main transmission channels would importantly contribute to the knowledge in this area. Identification assumptions for contemporaneous inflation behavior generates practical monetary policy shocks, which also take into account various features of the small open economy. The orthogonal policy shocks generated with the help of our SVAR model suggested us various monetary transitory effects on output and the price level. Accordingly, based on the interpretation of impulse response functions, positive interest rate shock has certain disinflationary impact, opposing existing opinion on weakness of interest rate manipulation to keep inflation within the given band. At the same time, positive exchange rate shock leads to more sensitive increase in inflation rates. In addition, inflation inertia does explain a substantial increase in future inflation rates. This is in compliance with traditional EMEs literature on monetary policy transmission channels mechanisms.

Following the exchange-rate paper by Kim and Roubini (J Monet Econ 45(3):561–586, 2000), we revisit the questions on monetary policy, exchange rate delayed overshooting, the inflationary puzzle, and the weak monetary transmission mechanism; but we do so for the open Indian economy. We further incorporate a superior monetary measure, the aggregation-theoretic Divisia monetary aggregate. Our paper confirms the efficacy of the Kim and Roubini (J Monet Econ 45(3):561–586, 2000) contemporaneous restriction, customized for the Indian economy, especially when compared with recursive structure, which is damaged by the price puzzle and the exchange rate puzzle. The importance of incorporating correctly measured money into the exchange rate model is illustrated, when we compare models with no-money, simple-sum monetary measures, and Divisia monetary measures. Our results are confirmed in terms of impulse response, variance decomposition analysis, and out-of-sample forecasting. In addition, we do a flip-flop variance decomposition analysis, finding two important phenomena in the Indian economy: (i) the existence of a weak link between the nominal-policy variable and real-economic activity, and (ii) the use of inflation-targeting as a primary goal of the Indian monetary authority. These two main results are robust, holding across different time period, dissimilar monetary aggregates, and diverse exogenous model designs.

After almost 15 years, following the flagship exchange-rate paper written by Kim and Roubini (K&R henceforth); we revisit the widely relevant questions on monetary policy, exchange rate delayed overshooting, inflationary puzzle and weak monetary transmission mechanism in the Indian context. We further try to incorporate a superior form of the monetary measure called the Divisia monetary aggregate in the K&R setup. Our paper still rediscovers the efficacy of K&R contemporaneous restriction (customized for the Indian economy which is a developing G-20 nation unlike advanced G-6 nations that K&R worked with) especially when we compared with the recursive structure (which is plagued by price puzzle and exchange rate puzzle). The importance of bringing back 'Money' in the exchange rate model especially correctly measured monetary aggregate is convincingly illustrated when we contested across models with no-money, simple-sum monetary models and Divisia monetary models; in terms of impulse response (eliminating some of the persistent puzzles), variance decomposition analysis (policy variable explaining more of the exchange rate fluctuation) and out-of-sample forecasting (LER forecasting graph). Further, we do a flip-flop variance decomposition analysis, which leads us to conclude two important phenomena in the Indian economy, (i) weak link between the nominal-policy variable and the real-economic activity (ii) Indian monetary authority had inflation-targeting as one of their primary goals, in tune with the RBI Act. These two main results are robust, holding across different time period, dissimilar monetary aggregates and diverse exogenous model setups.

Money overtime has been deemphasized from most of the macroeconometric models of exchange rate making interest rate 'alone' the monetary policy instrument. One such model is Bjornland's (1999) Journal of International Economics and Monetary Policy and Exchange Rate Overshooting: Dornbusch was right after all. The model sets out to establish the empirical validity of Dornbusch exchange rate overshooting hypothesis for four small open economies. It does so though not with exact precision. When the same model is done using the correct econometric techniques, the impulse response functions for exchange rate due to a monetary policy shock are infact 'insignificant'. In this paper we revisit the Dornbusch exchange rate overshooting in a different model setting. A real money demand equations is added to the original model. Identification is achieved by imposing short-run and long-run restrictions while keeping the short-run interactions between the two variables monetary policy and exchange rate free. Classical neutrality of money is imposed according to which the monetary shocks are long-run neutral to certain real variables. Our paper rediscovers the validity of Dornbusch Overshooting hypothesis for Australia, Canada, Newzealand and Sweden when we compare it with Bjornland's model. More specifically, a contractionary monetary policy shock leads to exchange rate overshooting as predicted by Dornbusch. The exchange rate appreciates 'significantly' on impact to a monetary policy shock as shown by the impulse response functions and thereafter depreciates. Also the variance decomposition results justify our analysis by showing that money demand and money supply shocks explain siginificant portion of exchange rate fluctuations vis-a-vis Bjornland's original model.

This article presents three alternative models for decomposing loan developments into components associated with changes in loan demand and supply fundamentals. Two models are based on macro data (error correction model and structural vector autoregression with sign restrictions) and one is based on bank-specific Bank Lending Survey results. We conclude that although loan growth in Russia converges to a long-run equilibrium determined by macroeconomic (demand) factors the convergence is likely to be driven by bank-side (supply) shocks. We identify large and unexplained supply shocks in loan fluctuations during the crisis of 2008-2009, signifying an impairment of credit markets. We also find contractionary shocks unrelated to demand fundamentals or balance sheet structures in 2013, although in general loan developments in 2013 and the first half of 2014 were not at all extraordinary.

This paper asks two questions. First, can we detect empirically whether the shocks recovered from the estimates of a structural VAR are truly structural Second, can the problem of nonfundamentalness be solved by considering additional information? The answer to the first question is “yes” and that to the second is “under some conditions”. JEL Classification: C32, C33, E00, E32, O3

In this paper, by using a combination of long-run and short-run restrictions, we identify a small structural VECM which includes inflation, unemployment and the federal funds rate and study the dynamic interactions at different frequencies among these variables. Our results show that: (a) in accordance with the traditional view of economic fluctuations, aggregate demand shocks and monetary policy shocks push inflation and unemployment in opposite directions in the short run; (b) the permanent supply shock explains the long-run movement of inflation and unemployment. These conclusions are at odds with the prediction of “natural-rate” models but are consistent with the idea of a propagation mechanism which links productivity shocks to inflation and unemployment at medium and low frequencies. Thus, with respect to some recent studies (e.g. Beyer and Farmer, ECB Working Paper 121, 2002, and Ireland, J Monet Econ 44:279–291, 1999), we offer a different interpretation of the low-frequency comovements between inflation and unemployment characterizing the US economy in the last decades.

Korean Abstract: 유가충격은 미관측변수이므로 충격을 어떻게 정의하느냐에 따라서 거시경제변수에 미치는 파급효과도 상이할 수 있다. 이에 본 연구는 선행연구에서 제시하는 가격기준과 수량기준의 유가충격을 정의하고 선형ㆍ비선형 유가충격변수가 국내경제성장과 인플레이션에 미치는 효과를 비교ㆍ분석하였다. 특히 실질유가충격의 속성(상승 혹은 하락)에 따라서 거시경제변수가 비대칭적으로 반응하는가를 조사하였다. 실증분석에 따르면 가격기준의 실질유가충격은 거시경제변수에 비대칭적인 영향을 미치는 것으로 나타났다. 즉 유가상승충격은 경제성장을 위축시키고 인플레이션을 상승시킨 반면 유가하락충격은 경제성장과 인플레이션에 영향이 없었다. 유가상승충격의 경제성장 탄력성은 최대 -0.05%이고 인플레이션 탄력성은 0.081%이다. 반면 수량기준의 실질유가충격은 거시경제변수에 대칭적으로 영향을 미치는 것으로 나타났다. 수량기준의 유가상승충격과 하락충격은 모두 경제성장에 미치는 영향이 없었으나, 인플레이션은 유가상승충격에 상승하고 하락충격에 하락하는 대칭성을 보였다. 유가상승충격의 인플레이션 탄력성은 최대 0.015%이고 하락충격의 탄력성은 최대 -0.01%였다. English Abstract: Oil shocks are unobserved variables. The impacts of oil shocks on macroeconomic variables may be different on how they are defined. Oil shocks are defined as both a price and an oil production shortfall criterion. This paper seeks to compare and analyze the impacts that oil shocks as defined by these criterion, have on macroeconomic variables, such as, domestic economic growth and inflation. In particular, the asymmetric response of macroeconomic variables to the nature of oil shocks is investigated. Multivariate structural VAR analysis is carried out using both linear and nonlinear models. The latter category includes three approaches employed in the literature, namely, the asymmetric, scaled and net specifications. Empirical analysis shows that oil price shocks have an asymmetric effect on macroeconomic variables. In the case of oil price increase shocks, it reduces economic growth and increases the inflation rate, but oil price decrease shocks do not have any significant effects on these variables. The elasticity of economic growth against oil price increase shocks is -0.05%, while that against the inflation rate is 0.081%. But oil production shortfall shocks do not have an asymmetric effect on macroeconomic variables. Oil production shortfall shocks in both increases and decreases have no effect on economic growth, but do have a symmetric effect in both positive and negative oil production shortfall shocks on the rate of inflation. The elasticity of inflation rate for positive oil production shortfall shocks was at most 0.015% and for negative oil production shortfall shocks was at most -0.01%.

This paper estimates a structural VAR model for Switzerland consisting of key macroeconomic variables with quarterly data from 1974 to 2002, which allows the identification of a monetary policy shock with plausible impulse response patterns. Conditional forecasts generated by this model are used to analyse monetary policy within the new policy framework of the Swiss National Bank. The generation of these conditional forecasts attempts to take the Lucas critique into account.

The aim of this study is to investigate both the short-run and long-run relationship between inflation and unemployment characterizing the US economy in the last 30 years. To this end a cointegrated structural VAR vs built. Since unemployment does not cause inflation at frequency zero a recursive structure, with inflation ordered first, allows the identification of a permanent and a transitory shock (cf. Ribba, Economics Letters 56, pp. 253–6, 1997). The main conclusions of the investigation are that: (i) in the short run, the existence of a tradeoff induced by the transitory shock is confirmed; (ii) in the long run, the two variables move one-for-one in the same direction driven by a permanent supply shock.

Determinants of the equilibrium unemployment rate and adjustments on the labour market : an analysis using French data. This article proposes an extension of the determinants of the equilibrium unemployment rate by incorporating technology and capital. With the help of a model of the labour market, we show that the equilibrium unemployment rate can depend on productivity shocks using assumptions that are relatively unrestrictive. At empirical level, the estimation of a structural VAR model using French quarterly data indicates that wage shocks contribute to the persistence of unemployment uniquely in the short term. In the longer term, technological innovation leads to an increase in unemployment combined with a decline in the share of wages, which is in conformity with recent stylised facts. This shock could then be reinterpreted as an excessive substitution of capital for labour stemming from an aversion on the part of firms to the labour factor., Cet article propose d’élargir les déterminants du taux de chômage d’équilibre en intégrant la technologie et le capital. À l’aide d’une maquette du marché du travail, nous montrons que le chômage d’équilibre peut dépendre des chocs de productivité sous des hypothèses peu restrictives. Au niveau empirique, l’estimation d’un modèle VAR structurel sur données trimestrielles françaises indique que les chocs salariaux contribuent à la persistance du chômage uniquement à court terme. A plus long terme, l’innovation technologique conduit à un accroissement du chômage combiné à une baisse de la part salariale, ce qui est conforme aux faits stylisés récents. Ce choc pourrait alors se réinterpréter comme une substitution excessive du capital au travail provenant d’une aversion des entreprises au facteur travail., Gérard-Prenveille Laura. Déterminants du taux de chômage d’équilibre et ajustements sur le marché du travail : une analyse sur données françaises. In: Économie & prévision, n°159, 2003-3. pp. 17-37.

The Fiscal Responsibility Act 1994 states that, as a principle of responsible fiscal management, a New Zealand government should ensure total Crown debt is at a prudent level by ensuring total operating expenses do not exceed total operating revenues. In this paper a structural VAR model is estimated to evaluate the impact on the government's cash operating surplus (or budget balance) of four independent disturbances: supply, fiscal, real private demand, and nominal disturbances. Based on the distribution of these disturbances, stochastic simulations are undertaken to derive the level of the ex ante cash budget balance needed to achieve an actual cash budget balance, at a given level of probability, at some future time horizon.

This paper reviews the ability of the traditional aggregate demand–aggregate supply framework to explain the unemployment fluctuations of the last three decades. A structural VAR model for the growth rates of labor productivity, inflation and unemployment is estimated on American and French data. By using long-run identifying restrictions, unemployment fluctuations are associated with conventional aggregate demand and aggregate supply shocks and with a supplementary residual innovation. One key finding is that the residual shock is far more significant in France than in the United States. The traditional macroeconomic synthesis proves then to be well suited for the American labor market while it leaves unexplained a large part of the French unemployment drift. This result questions the conventional prior that the heterogeneity in unemployment experiences lies in the magnitude of aggregate shocks or in their propagation mechanisms and calls for alternative explanations.