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A Method for Working with Sign Restrictions in Structural Equation Modelling
Author(s) -
Ouliaris Sam,
Pagan Adrian
Publication year - 2016
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12137
Subject(s) - sign (mathematics) , parametric statistics , impulse (physics) , range (aeronautics) , parametric equation , mathematics , impulse response , computer science , mathematical analysis , statistics , physics , engineering , geometry , quantum mechanics , aerospace engineering
The paper sets out a method for handling sign restrictions in systems of simultaneous equations which are only partially identified. These sign restrictions might apply to either structural equation parameters or functions of them such as impulse responses. Initially a range of values for the unidentified parameters are generated and then the role of sign restrictions is to narrow the range. It is simple to apply and can be handled in packages such as EViews and Stata. Examples are given of how to implement it in a number of cases where there are both parametric and sign restrictions.