Vector Autoregressions

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Fiscal Theory• Equation depicting payments to governmentbondholders:B 0 1t ∑ t0Tt −1rG t P 0• Standard Fiscal Theory– Price level flexible– When G or T changes, P 0 adjusts immediately• Fiscal Theory with sticky prices– G jumps or T drops implies r falls– Low r stimulates consumption• To explore Fiscal Theory story, must check whatTo explore Fiscal Theory story, must check whathappens to r after fiscal shock.
• Fiscal policy shocks– Example of Sims’ suggestion that VARs canbe a ‘battleground’ for discriminating betweendifferent theories.
Page 1 and 2:
Brief Review of VARsLawrence J. Chr
Page 3:
Outline of SVAR discussion• What
Page 15 and 16: Identifying Monetary Policy Shocks
Page 17 and 18: What is a Monetary Policy Shock?•
Page 22 and 23: Long Run Identification of Technolo
Page 24 and 25: Identification• When monetary pol
Page 27: • We will now estimate impulse re
Page 36: Timing Assumptions• ‘Extreme’
Page 39: Result of Allowing Output toRespond
Page 43 and 44: Historical Decomposition of Data•
Page 45 and 46: Type of technology shock that affec
Page 47 and 48: All three shocks together account f
Page 51 and 52: Fiscal Shocks• SVAR analysis of d
Page 53: Burnside, Eichenbaum and Fisher•
Page 58: Conclusions of VAR discussion• We
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Vector Autoregressions

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