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Uncertain identification

Giacomini, R; Kitagawa, T; Volpicella, A; (2021) Uncertain identification. Quantitative Economics (In press). Green open access

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Abstract

Uncertainty about the choice of identifying assumptions is common in causal studies, but is often ignored in empirical practice. This paper considers uncertainty over models that impose different identifying assumptions, which can lead to a mix of point- and set- identified models. We propose performing inference in the presence of such uncertainty by generalizing Bayesian model averaging. The method considers multiple posteriors for the set-identified models and combines them with a single posterior for models that are either point-identified or that impose non-dogmatic assumptions. The output is a set of posteriors (post-averaging ambiguous belief ), which can be summarized by reporting the set of posterior means and the associated credible region. We clarify when the prior model probabilities are updated and characterize the asymptotic behavior of the posterior model probabilities. The method provides a formal framework for conducting sensitivity analysis of empirical findings to the choice of identifying assumptions. For example, we find that in a standard monetary model one would need to attach a prior probability greater than 0.28 to the validity of the assumption that prices do not react contemporaneously to a monetary policy shock, in order to obtain a negative response of output to the shock.

Type: Article
Title: Uncertain identification
Open access status: An open access version is available from UCL Discovery
Publisher version: https://qeconomics.org/ojs/index.php/qe
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions.
Keywords: Partial Identification, Sensitivity Analysis, Model Averaging, Bayesian Robustness, Ambiguity
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10134671
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