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Time-Varying Local Projections

Author

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  • Germano Ruisi

    (Queen Mary University of London)

Abstract

In recent years local projections have become a more and more popular methodology for the estimation of impulse responses. Besides being relatively easy to implement, the main strength of this approach relative to the traditional VAR one is that there is no need to impose any specific assumption on the dynamics of the data. This paper models local projections in a time-varying framework and provides a Gibbs sampler routine to estimate them. A simulation study shows how the performance of the algorithm is satisfactory while the usefulness of the model developed here is shown through an application to fiscal policy shocks.

Suggested Citation

  • Germano Ruisi, 2019. "Time-Varying Local Projections," Working Papers 891, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:891
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2019/wp891.pdf
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    References listed on IDEAS

    as
    1. Silvia Miranda-Agrippino & Giovanni Ricco, 2021. "The Transmission of Monetary Policy Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 74-107, July.
    2. Gergely Ganics & Atsushi Inoue & Barbara Rossi, 2021. "Confidence Intervals for Bias and Size Distortion in IV and Local Projections-IV Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 39(1), pages 307-324, January.
    3. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, vol. 100(3), pages 763-801, June.
    4. Pascal Paul, 2020. "The Time-Varying Effect of Monetary Policy on Asset Prices," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 690-704, October.
    5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    6. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
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    Cited by:

    1. Philippe Goulet Coulombe, 2020. "Time-Varying Parameters as Ridge Regressions," Papers 2009.00401, arXiv.org, revised Mar 2021.

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    More about this item

    Keywords

    Time-Varying Coefficients; Local Projections;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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