Infinite-Variance, Alpha-Stable Shocks in Monetary SVAR: Final Working Paper Version

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in August 2011* Acknowledgments: The author thanks the Levy Institute for the opportunity to issue this more definitive and encompassing version of Levy Institute Working Paper no. 596, which appeared in May 2010. This final version was substantially completed in June 2011. It adds to the earlier working paper, among other things: a new introduction; new P-P plots that allow the reader to compare the fits of estimated normal, Student's-t, and stable distributions for the innovations in one VAR; tables reporting log-likelihoods and Kolmogorov-Smirnov and Anderson-Darling statistics for four error-term models and two different VAR specifications; and tables reporting many new results from parametric-bootstrap tests. Working Paper no. 596 itself was in turn a greatly revised and expanded version of Working Paper no. 546 (Hannsgen 2008), though it, too, featured many new findings. The author wishes to thank Olivier Blanchard, an associate editor, and anonymous referees for comments on previous drafts that led to many substantial improvements in the paper. Also, he thanks John Nolan for answers and advice, and those who attended a seminar at the Levy Institute for their useful comments and suggestions. The author is also grateful to Michael Woodroofe for guidance on Woodroofe's research. Discussions with Greg Colman and Kenneth Hannsgen led to improvements in some of the explanations and arguments presented in this and the earlier papers. Though grateful to each of the scholars mentioned above, the author has, of course, not followed all of their advice throughout this paper.The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals.Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. ABSTRACTThis paper adumbrates a theory of what might be going wrong in the monetary SVAR literature and provides supporting empirical evidence. The theory is that macroeconomists may be attempting to identify structural forms that do not exist, given the true distribu...