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Local Projections for Applied Economics

Author

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  • Òscar Jordà

    (Department of Economics, University of California, Davis, California, USA)

Abstract

The dynamic causal effect of an intervention on an outcome is of paramount interest to applied macro- and microeconomics research. However, this question has been generally approached differently by the two literatures. In making the transition from traditional time series methods to applied microeconometrics, local projections can serve as a natural bridge. Local projections can translate the familiar language of vector autoregressions and impulse responses into the language of potential outcomes and treatment effects. There are gains to be made by both literatures from greater integration of well-established methods in each. This review shows how to make these connections and points to potential areas of further research.

Suggested Citation

  • Òscar Jordà, 2023. "Local Projections for Applied Economics," Annual Review of Economics, Annual Reviews, vol. 15(1), pages 607-631, September.
    • Handle: RePEc:anr:reveco:v:15:y:2023:p:607-631
    DOI: 10.1146/annurev-economics-082222-065846
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    More about this item

    Keywords

    local projections; vector autoregressions; panel data; potential outcomes;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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