This is the LRMN restriction, which forces the upper right element of B(1) to be zero, or [[summation].sup.[infinity].sub.j=0] [B.sub.j,l,2] = B(1)1,2 = 0.
Next we calculate the reduced form VMA([infinity]) and apply the BQ decomposition by imposing the LRMN restriction to recover the SVMA([infinity]) of equation (A3.2).
A3.2 The ABCs and Ds of the NKDSGE models, LRMN, and SVARs
We exploit their condition to tie the shocks of a structural VAR (SVAR) identified by LRMN to the NKDSGE model shocks [[zeta].sub.t].
We rely on LRMN for identification of the SVMA([infinity]) of equation (A3.2).
We focus on the latter type of restriction to identify the SVAR of (A 3.8) with LRMN. The identification relies on the response of the level of output to a permanent change in the nominal shock [[eta].sub.2,t], which is