I posted on my “current work” and “publication” page the last revision of a paper with Paul Beaudry, Patrick Fève and Alain Guay “When is nonfundamentalness in SVARs a real problem?” . That work is forthcoming in the Review of Economic Dynamics. As written in the abstract,
In SVARs, identification of structural shocks can be subject to nonfundamentalness, as the econometrician may have an information set smaller than the economic agents’ one. How se- rious is that problem from a quantitative point of view? In this paper we propose a simple diagnostic for the quantitative importance of nonfundamentalness in structural VARs. The di- agnostic is of interest as nonfundamentalness is not an either/or question, and its quantitative implications can be more or less severe. As an illustration, we apply our diagnostic to the iden- tification of TFP news shocks and we find that nonfundamentalness is of little quantitatively importance in that context.
Key Words are NonFundamentalness, BusinessCycles, SVARs, NewsShocks.
JEL Classification codes are C32, E32.