arXiv 4 Jan 2026 · Econometrics
arXiv:2601.01622 · PDF · DOI · OpenAlex · Extracted main text
This paper studies state-dependent local projections (LPs). First, I establish a general characterization of their estimand: under minimal assumptions, state-dependent LPs recover weighted averages of causal effects. This holds for essentially all specifications used in practice. Second, I show that state-dependent LPs and VARs target different estimands and propose a simple VAR-based estimator whose probability limit equals the LP estimand. Third, in instrumental variable (LP-IV) settings, state-dependent weighting can generate nonzero interaction terms, even when the effects are not state-dependent. Overall, this paper shows how to correctly interpret state-dependent LPs, clarifying their connection to VARs and highlighting a key source of LP-IV misinterpretation.
appendix boundary found by appendix_command · 78% of the source is main text. Read the extracted text to check this.
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 | Michal Kolesár and Mikkel Plagborg-Møller (2024) Dynamic Causal Effects in a Nonlinear World: the Good, the Bad, and the Ugly | 1.000 | 13 | 5 | 100% |
| 2 | Mikkel Plagborg-Møller and Christian K. Wolf (2021) Local Projections and Vars Estimate the same Impulse Responses | 1.000 | 5 | 3 | 100% |
| 3 | Ashesh Rambachan and Neil Shephard (2021) When do common time series estimands have nonparametric causal meaning? | 0.928 | 4 | 3 | 100% |
| 4 | S\'ilvia Gon calves and Ana Mar\'ia Herrera and Lutz Kilian and Elen… (2024) State-dependent local projections | 0.916 | 13 | 6 | 77% |
| 5 | Valerie A. Ramey and Sarah Zubairy (2018) Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data | 0.843 | 4 | 3 | 75% |
| 6 | Tomás E. Caravello and Pedro Mart\'inez Bruera (2024) Disentangline Sign and Size Non-Linearities | 0.843 | 3 | 3 | 100% |
| 7 | Julian F. Ludwig (2024) Local Projections are VAR Predictions of Increasing Order | 0.811 | 4 | 2 | 100% |
| 8 | Alan J. Auerbach and Yuriy Gorodnichenko (2013) Fiscal Policy after the Financial Crisis | 0.737 | 3 | 2 | 100% |
| 9 | Alan J. Auerbach and Yuriy Gorodnichenko (2012) Measuring the Output Responses to Fiscal Policy | 0.693 | 9 | 3 | 33% |
| 10 | Alan J. Auerbach and Yuriy Gorodnichenko (2013) Output spillovers from fiscal policy | 0.644 | 3 | 2 | 67% |
Showing the top 10 of 69 scored citations.