Local Projections

A central question in applied research is to estimate the effect of an exogenous intervention or shock on an outcome. The intervention can affect the outcome and controls on impact and over time. Moreover, there can be subsequent feedback between outcomes, controls and the intervention. Many of these interactions can be untangled using local projections. This method’s simplicity makes it a convenient and versatile tool in the empiricist’s kit, one that is generalizable to complex settings. This article reviews the state-of-the art for the practitioner, discusses best practices and possible extensions of local projections methods, along with their limitations.

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Publication Details

Journal
Federal Reserve Bank of San Francisco, Working Paper Series
Published
2024-08-12
DOI
https://doi.org/10.24148/wp2024-24
Citations
4
Primary Topic
Efficiency Analysis Using DEA
Type
article
Field-Weighted Citation Impact
1.96
Controls
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article

Local Projections

Òscar Jordà, Alan M. Taylor
4 citations
Federal Reserve Bank of San Francisco, Working Paper Series
Efficiency Analysis Using DEA
1.96
article

Local Projections

Òscar Jordà, Alan M. Taylor
article en
4 citations

Abstract

A central question in applied research is to estimate the effect of an exogenous intervention or shock on an outcome. The intervention can affect the outcome and controls on impact and over time. Moreover, there can be subsequent feedback between outcomes, controls and the intervention. Many of these interactions can be untangled using local projections. This method’s simplicity makes it a convenient and versatile tool in the empiricist’s kit, one that is generalizable to complex settings. This article reviews the state-of-the art for the practitioner, discusses best practices and possible extensions of local projections methods, along with their limitations.

Federal Reserve Bank of San Francisco, Working Paper SeriesVol. 2024(24)
Columbia University (US), University of California, Davis (US)
Openalex Percentile: Top 13%
Efficiency Analysis Using DEA
1.96
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