I am trying to identify structural shocks of the following three variables; Terms of trade, productivity and real exchange rate. I tried assuming that terms of trade (global) shock has no impact on domestic variables (productivity and real exchange rate); productivity shock-supply shock has no long run impact on real exchange rate-demand shock. Any help to identify the restrictions correctly?
Raymond Adu from my opinion, kindly read out the debate of exogenous and endogenous structural break or shock measurement. Better literature and understanding of models can help you a lot.
Raymond Adu ,
when it comes about the relation between productivity, exchange rate, and terms of trade, there are no better literature other then the ECLAC's structuralist school.
If you read spanish or portuguese, I suggest you to read René Villarreal.
Otherwise, you can find good material on ECLAC's publication on neostructuralism and heteredox thinking (available on this link: https://www.cepal.org/en/publications/40121-neostructuralism-and-heterodox-thinking-latin-america-and-caribbean-early-twenty).
There are a lot of works that ponder how the terms of trade shocks affected Latin America. That is a subject we, that live on underdeveloped or developing countries consider as very important. So, try to search for studies about Brazil, Mexico, Argentina, Chile, etc.
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