IMF Working Papers

Sign Restrictions with a New-Keynesian Macro Model: Results From a “Quasi-Agnostic” Identification Procedure

By Gregorio Impavido

August 15, 2025

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Format: Chicago

Gregorio Impavido. "Sign Restrictions with a New-Keynesian Macro Model: Results From a “Quasi-Agnostic” Identification Procedure", IMF Working Papers 2025, 162 (2025), accessed August 22, 2025, https://doi.org/10.5089/9798229021593.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper proposes a “quasi-agnostic” sign restriction procedure to identify structural shocks in frequentist structural vector autoregression (SVAR) models. It argues that low acceptance rates, inherent to agnostic sign restriction procedures, are not necessarily an indication of model misspecification. They can be low because agnostic procedures fail to exploit the ex ante priors on the sign of responses of macro variables to structural shocks.

Subject: Central bank policy rate, Econometric analysis, Economic theory, Financial services, Inflation, Neoclassical theory, Output gap, Prices, Production, Structural vector autoregression, Supply shocks, Vector autoregression

Keywords: Central bank policy rate, Demand for money, Emerging Asia, Estimation techniques, Inflation, Neoclassical theory, Output gap, Parametric restrictions, Sign restrictions, Structural vector autoregression, Supply shocks, SVARs, VARs, Vector autoregression

Publication Details

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