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I am trying to estimate a bi-variate sign-restricted SVAR with daily oil and stock prices and two shocks (demand and supply).

The ultimate goal is to explain how much of the recent fall in oil prices stems from a demand shock (defined as a fall in both equity and oil prices) or a supply shock (defined as a rise in equity prices and a fall in oil prices).

I have written the model and understand the math behind it but I fail to implement it in a statistical package (Eviews or R). More specifically, the methodology to estimate the structural parameters with the contemporaneous sign restrictions eludes me.

Would anyone be so kind as to point towards a code or examples (R or Eviews preferably, but could be Gretl as well) that I could use for that part? Thank you!

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  • $\begingroup$ Do you have a reference where the methodology is clearly explained? $\endgroup$
    – Richard Hardy
    Feb 12, 2016 at 11:10
  • $\begingroup$ Hi, thanks for your answer. Well, the methodology is identical to the one used in the IMF working paper 14/167: "News and Monetary shocks at a high frequency: A simple approach" on page 3. $\endgroup$
    – user2952666
    Feb 15, 2016 at 12:47

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I guess the answer comes too late for you but maybe useful for others. The gretl addon "SVAR" does support sign-restricted SVAR models since version 1.9.

See ch. 8 on "Set-identified SVARs" in the package manual: https://sourceforge.net/projects/gretl/files/addons/doc/SVAR.pdf

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This approach is not natively implemented in Gretl, yet. But of course it can be programmed up using its matrix based scripting language.

However, there are a few Matlab codes available. Just google it.

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