José Luis Montiel Olea, Mikkel Plagborg-Møller, Eric Qian, Christian K. Wolf
arXiv 21 Mar 2025 · Econometrics · 23 citations (OpenAlex)
arXiv:2503.17144 · PDF · DOI · OpenAlex · Extracted main text
What should applied macroeconomists know about local projection (LP) and vector autoregression (VAR) impulse response estimators? The two methods share the same estimand, but in finite samples lie on opposite ends of a bias-variance trade-off. While the low bias of LPs comes at a quite steep variance cost, this cost must be paid to achieve robust uncertainty assessments. Hence, when the goal is to convey what can be learned about dynamic causal effects from the data, VARs should only be used with long lag lengths, ensuring equivalence with LP. For LP estimation, we provide guidance on selection of lag length and controls, bias correction, and confidence interval construction.
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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 | Kilian and Lütkepohl (2017) Structural Vector Autoregressive Analysis | 1.000 | 7 | 4 | 100% |
| 2 | Li, Plagborg-Mller, and Wolf (2024) Local projections vs.\ VARs: Lessons from thousands of DGPs self | 1.000 | 7 | 4 | 100% |
| 3 | Herbst and Johannsen (2024) Bias in local projections | 1.000 | 6 | 4 | 100% |
| 4 | Plagborg-Mller and Wolf (2021) Local Projections and VARs Estimate the Same Impulse Responses | 0.874 | 6 | 2 | 100% |
| 5 | Montiel Olea, Plagborg-Mller, Qian, and Wolf (2024) Double Robustness of Local Projections and Some Unpleasant VARithmetic | 0.874 | 5 | 2 | 100% |
| 6 | Barnichon and Brownlees (2019) Impulse Response Estimation by Smooth Local Projections | 0.843 | 3 | 3 | 100% |
| 7 | Giannone, Lenza, and Primiceri (2015) Prior selection for vector autoregressions | 0.843 | 3 | 3 | 100% |
| 8 | Xu (2023) Local Projection Based Inference under General Conditions | 0.811 | 4 | 2 | 100% |
| 9 | Jordà (2005) Estimation and Inference of Impulse Responses by Local Projections | 0.737 | 3 | 2 | 100% |
| 10 | Montiel Olea and Plagborg-Mller (2021) Local Projection Inference Is Simpler and More Robust Than You Think | 0.644 | 4 | 1 | 100% |
Showing the top 10 of 57 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Estimator Averaging of Local Projection and VAR Impulse Responses | 0.811 | 4 | 2 |
| 2 | Targeted Local Projections | 0.737 | 3 | 2 |
| 3 | Approximate Minimax Estimation of a Bounded Normal Mean via Stochastic Mirror Ascent | 0.737 | 3 | 2 |
| 4 | Double Robustness of Local Projections and Some Unpleasant VARithmetic | 0.405 | 1 | 1 |