The Review of Economics and Statistics Vol. 85 No. 4 2003
Identification Through Heteroskedasticity
Abstract
This paper develops a method for solving the identification problem that arises in simultaneous-equation models. It is based on the heteroskedasticity of the structural shocks. For simplicity, I consider heteroskedasticity that can be described as a two-regime process and show that the system is just identified. I discuss identification under general conditions, such as more than two regimes, when common unobservable shocks exist, and situations in which the nature of the heteroskedasticity is misspecified. Finally, I use this methodology to measure the contemporaneous relationship between the returns on Argentinean, Brazilian, and Mexican sovereign bonds—a case in which standard identification methodologies do not apply.
- DOI
- 10.1162/003465303772815727
- Volume
- 85
- Issue
- 4
- Pages
- 777-792
- Language
- en
- Sources
- crossref openalex