Paper

{
  "raw_xml": "<entry>\n    <id>http://arxiv.org/abs/2603.16035v1</id>\n    <title>Identification Verification for Structural Vector Autoregressions with Sparse Heterogeneous Markov Switching Heteroskedasticity</title>\n    <updated>2026-03-17T00:41:19Z</updated>\n    <link href='https://arxiv.org/abs/2603.16035v1' rel='alternate' type='text/html'/>\n    <link href='https://arxiv.org/pdf/2603.16035v1' rel='related' title='pdf' type='application/pdf'/>\n    <summary>We propose a structural vector autoregressive model with a new and flexible specification of the volatility process which we call Sparse Heterogeneous Markov-Switching Heteroskedasticity. In this model, the conditional variance of each structural shock changes in time according to its own Markov process. Additionally, it features a sparse representation of Markov processes, in which the number of regimes is set to exceed that of the data-generating process, with some regimes allowed to have zero occurrences throughout the sample. We complement these developments with a definition of a new distribution for normalised conditional variances that facilitates Gibbs sampling and identification verification. In effect, our model: (i) normalises the system and estimates the structural parameters more precisely than popular alternatives; (ii) can be used to verify homoskedasticity reliably and, thus, inform identification through heteroskedasticity; and (iii) features excellent forecasting performance comparable with Stochastic Volatility. Finally, revisiting a prominent macro-financial structural system, we provide evidence for the identification of the US monetary policy shock via heteroskedasticity, with estimates consistent with those reported in the literature.</summary>\n    <category scheme='http://arxiv.org/schemas/atom' term='econ.EM'/>\n    <published>2026-03-17T00:41:19Z</published>\n    <arxiv:comment>Keywords: Identification Through Heteroskedasticity, Heterogeneous Markov Switching, Sparse Markov Process, Identification Verification</arxiv:comment>\n    <arxiv:primary_category term='econ.EM'/>\n    <author>\n      <name>Fei Shang</name>\n      <arxiv:affiliation>Guangdong University of Foreign Studies</arxiv:affiliation>\n    </author>\n    <author>\n      <name>Tomasz Woźniak</name>\n      <arxiv:affiliation>University of Melbourne</arxiv:affiliation>\n    </author>\n  </entry>"
}