Many economic analyses revolve around the identification of shocks. However, this becomes difficult if we do not have enough information, for example because we do not observe the underlying process at a high enough frequency. As a result, if the response of one variable to a shock to another takes place `in the nick of time' this shock remains unidentified. We introduce a structural vector-autoregression model with Markov-switching heteroskedasticity in the data generating process that allows us to study instantaneous impulse-response relationships with the proper selection of a supporting `catalyst', which can be easier to find than an instrumental variable.
|Publisher||Maastricht University, Graduate School of Business and Economics|
|Publication status||Published - 31 Aug 2017|
|Series||GSBE Research Memoranda|
- g13 - "Contingent Pricing; Futures Pricing; option pricing"
- c32 - "Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models"
- q02 - Global Commodity Crises
- Commodity prices
- Index Trading
Sun, H., Bos, J. W. B., & Li, Z. (2017). In the Nick of Time: A Heteroskedastic SVAR Model and Its Application to the Crude Oil Futures Market. Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 019 https://doi.org/10.26481/umagsb.2017019