Principled Identification of Structural Dynamic Models (opens in new tab)

arXiv:2512.17005v2 Announce Type: replace-cross Abstract: We take a new perspective on identification in structural dynamic models: rather than imposing restrictions alone, we optimize an objective. While definitive structural identification ultimately requires exogenous economic insight, a weighted correlation-maximizing objective yields an Order- and Scale-Invariant Scheme (OASIS) that selects the orthogonal rotation most aligned with designated target variables. In traditional SVARs, these...