Chew Lian Chua, David Gunawan, Sandy Suardi
arXiv 4 Mar 2025 · Econometrics
arXiv:2503.02217 · PDF · OpenAlex · Extracted main text
This paper advances the local projections (LP) method by addressing its inefficiency in high-frequency economic and financial data with volatility clustering. We incorporate a generalized autoregressive conditional heteroskedasticity (GARCH) process to resolve serial correlation issues and extend the model with GARCH-X and GARCH-HAR structures. Monte Carlo simulations show that exploiting serial dependence in LP error structures improves efficiency across forecast horizons, remains robust to persistent volatility, and yields greater gains as sample size increases. Our findings contribute to refining LP estimation, enhancing its applicability in analyzing economic interventions and financial market dynamics.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Li, Plagborg-Møller and Wolf (2024) Local projections vs. VARs: Lessons from thousands of DGPs | 0.644 | 2 | 2 | 100% |
| 2 | Jordà (2005) Estimation and inference of impulse responses by local projections | 0.405 | 1 | 1 | 100% |
| 3 | Jalles and Karras (2024) Tax progressivity and income inequality in the US | 0.405 | 1 | 1 | 100% |
| 4 | Ma, Wang, Wang and Xiao (2024) US monetary policy and real exchange rate dynamics: the role of exchange rate arrangements and capital controls | 0.405 | 1 | 1 | 100% |
| 5 | Musholombo (2023) Cryptocurrencies and stock market fluctuations | 0.405 | 1 | 1 | 100% |
| 6 | Corsi (2009) A simple approximate long-memory model of realized volatility | 0.405 | 1 | 1 | 100% |
| 7 | Montiel Olea and Plagborg-Møller (2021) Local projection inference is simpler and more robust than you think | 0.405 | 1 | 1 | 100% |
| 8 | Stock and Watson (2018) Identification and estimation of dynamic causal effects in macroeconomics using external instruments | 0.405 | 1 | 1 | 100% |
Showing the top 8 of 8 scored citations.