Higher-Order Moment Inequality Restrictions for SVARs

We introduce a method that exploits some non-Gaussian features of structural shocks to identify structural vector autoregressive models. More specifically, we combine restrictions on the higher-order moments of these shocks with other set-identifying constraints, typically sign restrictions.  Using simulated data from a broad set of estimated models, we show that this approach considerably narrows the set of monetary policy shocks both in large or small sample settings. The proposed methodology also delivers new insights on the propagation of exogenous changes to US monetary policy, Euro-Area sovereign bond spreads, and worldwide geopolitical risk.

Filippo Ferroni is a senior economist on the macroeconomics team in the economic research department at the Federal Reserve Bank of Chicago. In that position, Ferroni provides research and analysis on macroeconomics and applied econometrics. Prior to joining the Fed, he worked as senior economist at the Banque de France and at the European Commission. Ferroni’s research has been published in the American Economic Journal: Macreconomics, Journal of Monetary Economics, Journal of European Economic Association, Journal of Econometrics, Journal of Applied Econometrics, Journal of Economic Dynamics and Control, International Economic Review and Quantitative Economics. Ferroni received a B.A. from Bocconi University, Milan (Italy), and an M.Sc. and a Ph.D. in economics from Universitat Pompeu Fabra, Barcelona (Spain).

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