Sign Restrictions in Structural Vector Autoregressions: A Critical Review

Adrian Pagan, Renee Fry

    Research output: Contribution to journalArticle


    The paper provides a review of the estimation of structural vector autoregressions with sign restrictions. It is shown how sign restrictions solve the parametric identification problem present in structural systems but leaves the model identification problem unresolved. A market and a macro model are used to illustrate these points. Suggestions have been made on how to find a unique model. These are reviewed. An analysis is provided of whether one can recover the true impulse responses and what difficulties might arise when one wishes to use the impulse responses found with sign restrictions.
    Original languageEnglish
    Pages (from-to)938-960
    JournalJournal of Economic Literature
    Issue number4
    Publication statusPublished - 2011


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