IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2204.13150.html
   My bibliography  Save this paper

Impulse response estimation via flexible local projections

Author

Listed:
  • Haroon Mumtaz
  • Michele Piffer

Abstract

This paper introduces a flexible local projection that generalizes the model by Jord\'a (2005) to a non-parametric setting using Bayesian Additive Regression Trees. Monte Carlo experiments show that our BART-LP model is able to capture non-linearities in the impulse responses. Our first application shows that the fiscal multiplier is stronger in recession than in expansion only in response to contractionary fiscal shocks, but not in response to expansionary fiscal shocks. We then show that financial shocks generate effects on the economy that increase more than proportionately in the size of the shock when the shock is negative, but not when the shock is positive.

Suggested Citation

  • Haroon Mumtaz & Michele Piffer, 2022. "Impulse response estimation via flexible local projections," Papers 2204.13150, arXiv.org.
    • Handle: RePEc:arx:papers:2204.13150
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2204.13150
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Castelnuovo, Efrem & Pellegrino, Giovanni, 2018. "Uncertainty-dependent effects of monetary policy shocks: A new-Keynesian interpretation," Journal of Economic Dynamics and Control, Elsevier, vol. 93(C), pages 277-296.
    2. Gordon, Robert J. & Krenn, Robert, 2010. "The End of the Great Depression 1939-41: Policy Contributions and Fiscal Multipliers," CEPR Discussion Papers 8034, C.E.P.R. Discussion Papers.
    3. James H. Stock & Mark W. Watson, 2018. "Identification and Estimation of Dynamic Causal Effects in Macroeconomics Using External Instruments," Economic Journal, Royal Economic Society, vol. 128(610), pages 917-948, May.
    4. Robert J. Gordon & Robert Krenn, 2010. "The End of the Great Depression 1939-41: Policy Contributions and Fiscal Multipliers," NBER Working Papers 16380, National Bureau of Economic Research, Inc.
    5. Lutz Kilian & Yun Jung Kim, 2011. "How Reliable Are Local Projection Estimators of Impulse Responses?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1460-1466, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Velasco, Sofia, 2024. "Asymmetries in the transmission of monetary policy shocks over the business cycle: a Bayesian Quantile Factor Augmented VAR," Working Paper Series 2983, European Central Bank.
    2. Piergiorgio Alessandri & Fabrizio Venditti & Oscar JordÃ, 2023. "Decomposing the monetary policy multiplier," Temi di discussione (Economic working papers) 1422, Bank of Italy, Economic Research and International Relations Area.
    3. Miescu, Mirela & Mumtaz, Haroon & Theodoridis, Konstantinos, 2024. "Non-linear Dynamics of Oil Supply News Shocks," Cardiff Economics Working Papers E2024/18, Cardiff University, Cardiff Business School, Economics Section.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haroon Mumtaz & Michele Piffer, 2022. "Impulse response estimation via fexible local projections," Working Papers 938, Queen Mary University of London, School of Economics and Finance.
    2. Ethan Ilzetzki, 2024. "Learning by Necessity: Government Demand, Capacity Constraints, and Productivity Growth," American Economic Review, American Economic Association, vol. 114(8), pages 2436-2471, August.
    3. Zacharias Bragoudakis & Dimitrios Panas, 2021. "Investigating government spending multiplier for the US economy: empirical evidence using a triple lasso approach," Working Papers 292, Bank of Greece.
    4. Edoardo Briganti & Victor Sellemi, 2022. "Why Does GDP Move Before G? It's all in the Measurement," Papers 2212.06073, arXiv.org, revised May 2023.
    5. Andrea Boitani & Salvatore Perdichizzi & Chiara Punzo, 2022. "Nonlinearities and expenditure multipliers in the Eurozone [Tales of fiscal adjustment]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(2), pages 552-575.
    6. Atems, Bebonchu, 2019. "The effects of government spending shocks: Evidence from U.S. states," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 65-80.
    7. Amendola, Adalgiso & Di Serio, Mario & Fragetta, Matteo & Melina, Giovanni, 2020. "The euro-area government spending multiplier at the effective lower bound," European Economic Review, Elsevier, vol. 127(C).
    8. Ji, Yangyang & Xiao, Wei, 2016. "Government spending multipliers and the zero lower bound," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 87-100.
    9. Ghassibe, Mishel & Zanetti, Francesco, 2022. "State dependence of fiscal multipliers: the source of fluctuations matters," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 1-23.
    10. Oh, Hyunseung & Reis, Ricardo, 2012. "Targeted transfers and the fiscal response to the great recession," Journal of Monetary Economics, Elsevier, vol. 59(S), pages 50-64.
    11. Sergio Destefanis & Valter Di Giacinto, 2022. "EU structural funds and GDP per capita: Spatial VAR evidence for the European regions," Discussion Paper series in Regional Science & Economic Geography 2022-09, Gran Sasso Science Institute, Social Sciences, revised Oct 2024.
    12. Pierre L. Siklos, 2020. "Looking into the Rear-View Mirror: Lessons from Japan for the Eurozone and the U.S?," IMES Discussion Paper Series 20-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    13. Charles Olivier Mao Takongmo & Laetitia Lebihan, 2021. "Government Spending, GDP and Exchange Rate in Zero Lower Bound: Measuring Causality at Multiple Horizons," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 139-160, March.
    14. Eichengreen, Barry, 2017. "A two-handed approach to secular stagnation: Some thoughts based on 1930s experience," Journal of Policy Modeling, Elsevier, vol. 39(4), pages 650-654.
    15. George Chouliarakis & Tadeusz Gwiazdowski & Sophia Lazaretou, 2016. "The Effect of Fiscal Policy on Output in Times of Crisis and Prosperity: Historical Evidence From Greece ," Centre for Growth and Business Cycle Research Discussion Paper Series 230, Economics, The University of Manchester.
    16. Martin Bruns & Helmut Lütkepohl, 2023. "An Alternative Bootstrap for Proxy Vector Autoregressions," Computational Economics, Springer;Society for Computational Economics, vol. 62(4), pages 1857-1882, December.
    17. Nicholas Crafts, 2013. "Returning to growth: lessons from the 1930s," Working Papers 13010, Economic History Society.
    18. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(3), pages 285-317, Autumn.
    19. Emmanuel Farhi & Ivan Werning, "undated". "Fiscal Multipliers: Liquidity Traps and Currency Unions," Working Paper 78556, Harvard University OpenScholar.
    20. Michael Cauvel, 2019. "The neo-Goodwinian model reconsidered," Working Papers PKWP1915, Post Keynesian Economics Society (PKES).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2204.13150. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.