Estimating Overidentified, Nonrecursive Time-Varying Coefficients Structural VARs

• Authors: Fernando J. Pérez Forero and Fabio Canova.
• BSE Working Paper: 637 | September 15
• Keywords: Bayesian methods , Non-recursive overidentified SVARs , Time-varying coefficient models , monetary transmission mechanism
• JEL codes: C11, E51, E52

This paper provides a method to estimate time varying coefficients structural VARs which are non-recursive and potentially overidentified. The procedure allows for linear and non-linear restrictions on the parameters, maintains the multi-move structure of standard algorithms and can be used to estimate structural models with different identification restrictions. We study the transmission of monetary policy shocks and compare the results with those obtained with traditional methods.