- Published
- 2021-01-01
- Venue
- Econometrica, vol. 89, no. 2, pp. 955-980
- Cited by
- 736
- Open access
- Yes, bronze
- DOI
- 10.3982/ecta17813
Abstract
We prove that local projections (LPs) and Vector Autoregressions (VARs) estimate the same impulse responses. This nonparametric result only requires unrestricted lag structures. We discuss several implications: (i) LP and VAR estimators are not conceptually separate procedures; instead, they are simply two dimension reduction techniques with common estimand but different finite‐sample properties. (ii) VAR‐based structural identification—including short‐run, long‐run, or sign restrictions—can equivalently be performed using LPs, and vice versa. (iii) Structural estimation with an instrument (proxy) can be carried out by ordering the instrument first in a recursive VAR, even under noninvertibility. (iv) Linear VARs are as robust to nonlinearities as linear LPs.
Cite this paper
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- APA 7
Plagborg‐Møller, M., & Wolf, C. K. (2021). Local Projections and VARs Estimate the Same Impulse Responses. Econometrica, 89(2), 955–980. https://doi.org/10.3982/ecta17813
- MLA 9
Plagborg‐Møller, Mikkel, and Christian K. Wolf. "Local Projections and VARs Estimate the Same Impulse Responses." Econometrica, vol. 89, no. 2, 2021, pp. 955–980, https://doi.org/10.3982/ecta17813.
- Chicago
Plagborg‐Møller, Mikkel, and Christian K. Wolf. "Local Projections and VARs Estimate the Same Impulse Responses." Econometrica 89, no. 2 (2021): 955–980. https://doi.org/10.3982/ecta17813.
- GOST
Plagborg‐Møller M., Wolf C. K. Local Projections and VARs Estimate the Same Impulse Responses // Econometrica. — 2021. — Vol. 89, № 2. — P. 955–980. — URL: https://doi.org/10.3982/ecta17813
- BibTeX
@article{plagborgmller2021local, title = {{Local Projections and VARs Estimate the Same Impulse Responses}}, author = {Mikkel Plagborg‐Møller and Christian K. Wolf}, journal = {Econometrica}, year = {2021}, volume = {89}, number = {2}, pages = {955--980}, doi = {10.3982/ecta17813}, url = {https://doi.org/10.3982/ecta17813} }- RIS
TY - JOUR AU - Plagborg‐Møller, Mikkel AU - Wolf, Christian K. TI - Local Projections and VARs Estimate the Same Impulse Responses JO - Econometrica VL - 89 IS - 2 SP - 955 EP - 980 PY - 2021 DA - 2021/01/01 DO - 10.3982/ecta17813 UR - https://doi.org/10.3982/ecta17813 ER -