Identifying structural VARs from sparse narrative instruments: Dynamic effects of US macroprudential policies |
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Authors: | Katarzyna Budnik Gerhard Rünstler |
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Institution: | European Central Bank, Sonnemannstrasse 20, Frankfurt am Main, Germany |
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Abstract: | We study identification in Bayesian proxy VARs for instruments that consist of sparse qualitative observations indicating the signs of shocks in specific periods. We propose the Fisher discriminant regression and a non-parametric sign concordance criterion as two alternative methods for achieving correct inference in this case. The former represents a minor deviation from a standard proxy VAR, whereas the non-parametric approach builds on set identification. Our application to US macroprudential policies finds persistent declines in credit volumes and house prices together with moderate declines in GDP and inflation and a widening of corporate bond spreads after a tightening of capital requirements or mortgage underwriting standards. |
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Keywords: | borrower-based measures capital requirements narrative VAR proxy VAR |
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