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Policy analysis with beliefs about identifying restrictions

Objective

The principal tool for macroeconomic policy analysis both in the empirical literature and in actual practice at policy institutions is Structural Vector Autoregressions (SVARs). This research project aims to address the key controversy surrounding SVARs, namely the fact that the policy conclusions crucially depend on the choice of identifying restrictions. This choice is in practice arbitrary as there is no consensus in the literature about the credibility of the restrictions that are commonly used in applications. The central idea of this project is to allow a user to specify beliefs about the credibility of identifying restrictions. The goal is to propose methods for policy analysis that allow for flexible use of identifying restrictions, for example only using those supported by economic theory or incorporating restrictions with different degrees of credibility. These types of beliefs cannot be straightforwardly embedded into standard Bayesian analyses of SVARs and will require the development of new econometric tools. The research project aims to make both methodological and empirical contributions. On the methodological front, it will introduce to the time series literature and build on ideas from robust (multiple-prior) Bayesian analysis. At the same time, it will go beyond existing results and develop new methods that make not only a theoretical contribution, but also have useful applications outside of time series, for example to microeconometrics or, more in general, to Bayesian decision making under ambiguity. On the empirical front, the tools will enable a broad range of new applications that can help one investigate to what extent existing findings about the effectiveness of macroeconomic policy may be driven by the imposed assumptions and, ultimately, make it possible to search for policy conclusions that are robust to the choice of identifying restrictions.

Fields of science (EuroSciVoc)

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Keywords

Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)

Programme(s)

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Topic(s)

Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.

Funding Scheme

Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.

ERC-COG - Consolidator Grant

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Call for proposal

Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.

(opens in new window) ERC-2015-CoG

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Host institution

UNIVERSITY COLLEGE LONDON
Net EU contribution

Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.

€ 1 090 686,00
Address
GOWER STREET
WC1E 6BT LONDON
United Kingdom

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Region
London Inner London — West Camden and City of London
Activity type
Higher or Secondary Education Establishments
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Total cost

The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.

€ 1 090 686,00

Beneficiaries (1)

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