Estimation and inference of impulse responses by local projections

• 成果类型: Article
• 署名作者: Jordà, O
• 署名单位: University of California System; University of California Davis
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/0002828053828518
• 发表日期: 2005
• 页码: 161-182
• 关键词: nominal interest-rates; monetary-policy; MULTISTEP PREDICTION; UNANTICIPATED MONEY; MODEL; selection

摘要

This paper introduces methods to compute impulse responses without specification and estimation of the underlying multivariate dynamic system. The central idea consists in estimating local projections at each period of interest rather than extrapolating into increasingly distant horizons from a given model, as it is done with vector autoregressions (VAR). The advantages of local projections are numerous: (1) they can be estimated by simple regression techniques with standard regression packages; (2) they are more robust to misspecification; (3) joint or point-wise analytic inference is simple; and (4) they easily accommodate experimentation with highly nonlinear and flexible specifications that may be impractical in a multivariate context. Therefore, these methods are a natural alternative to estimating impulse responses from VARs. Monte Carlo evidence and an application to a simple, closed-economy, new-Keynesian model clarify these numerous advantages.