Micro responses to macro shocks

Martín Almuzara () and Víctor Sancibrián
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Martín Almuzara: Federal Reserve Bank of New York, https://www.newyorkfed.org/

Working Papers from CEMFI

Abstract: We study panel data regression models when the shocks of interest are aggregate and possibly small relative to idiosyncratic noise. This speaks to a large empirical literature that targets impulse responses via panel local projections. We show how to interpret the estimated coefficients when units have heterogeneous responses and how to obtain valid standard errors and confidence intervals. A simple recipe leads to robust inference: including lags as controls and then clustering at the time level. This strategy is valid under general error dynamics and uniformly over the degree of signal-to-noise of macro shocks.

Keywords: Panel data; local projections; impulse responses; aggregate shocks; inference; signal-to-noise; heterogeneity. (search for similar items in EconPapers)
JEL-codes: C22 C23 C32 C33 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-ets and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.cemfi.es/ftp/wp/2412.pdf (application/pdf)

Related works:
Working Paper: Micro Responses to Macro Shocks (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2024_2412

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