arXiv 24 Nov 2025 · Econometrics
arXiv:2511.19372 · PDF · Extracted main text
This paper proposes an identification inspired from the SVAR-IV literature that uses external instruments to identify PVARs, and discusses associated issues of identification, estimation, and inference. I introduce a form of local average treatment effect - the $μ$-LATE - which arises when a continuous instrument targets a binary treatment. Under standard assumptions of independence, exclusion, and monotonicity, I show that externally instrumented PVARs estimate the $μ$-LATE. Monte Carlo simulations illustrate that confidence sets based on the Anderson-Rubin statistics deliver reliable convergence for impulse responses. As an application, I instrument state-level military spending with the state's share of national spending to estimate the dynamic fiscal multiplier. I find multipliers above unity, with effects concentrated in the contemporaneous year and persisting into the following year.
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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 | Angrist, J. D., Imbens, G. W., and Rubin, D. B (1996) Identification of causal effects using instrumental variables | 1.000 | 5 | 4 | 100% |
| 2 | Nakamura, E. and Steinsson, J (2014) Fiscal stimulus in a monetary union: Evidence from us regions | 0.950 | 7 | 3 | 86% |
| 3 | Stock, J. H. and Watson, M. W (2018) Identification and estimation of dynamic causal effects in macroeconomics using external instruments | 0.928 | 4 | 3 | 100% |
| 4 | Olea, J. L. M., Stock, J. H., and Watson, M. W (2021) Inference in structural vector autoregressions identified with an external instrument | 0.888 | 10 | 6 | 70% |
| 5 | Pala, R (2025) The causal interpretation of panel vector autoregressions self | 0.737 | 4 | 2 | 75% |
| 6 | Gertler, M. and Karadi, P (2015) Monetary policy surprises, credit costs, and economic activity | 0.737 | 3 | 2 | 100% |
| 7 | Anderson, T. W. and Rubin, H (1949) Estimation of the parameters of a single equation in a complete system of stochastic equations | 0.644 | 2 | 2 | 100% |
| 8 | Mertens, K. and Ravn, M (2013) The dynamic effects of personal and corporate income tax changes in the united states | 0.644 | 2 | 2 | 100% |
| 9 | Mertens, K. and Ravn, M (2014) A reconciliation of svar and narrative estimates of tax multipliers | 0.644 | 2 | 2 | 100% |
| 10 | Rambachan, A. and Shephard, N (2021) When do common time series estimands have nonparametric causal meaning? | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 41 scored citations.