EconPapers    
Economics at your fingertips  
 

IS ECONOMIC RECOVERY A MYTH? ROBUST ESTIMATION OF IMPULSE RESPONSES

C. N. Teulings () and Nick Zubanov ()

Journal of Applied Econometrics, 2014, vol. 29, issue 3, 497-514

Abstract: SUMMARY We estimate the impulse response function (IRF) of GDP to a banking crisis using an extension of the local projections method. We demonstrate that, though robust to misspecifications of the data‐generating process, this method suffers from a hitherto unnoticed bias which increases with the forecast horizon. We propose a correction to this bias and show through simulations that it works well. Applying our corrected local projections estimator to the data from a panel of 99 countries observed between 1974 and 2001, we find that an average banking crisis yields a GDP loss of just under 10% in 10 years, with little sign of recovery. Like the original local projections method, our extension of it is widely applicable. Copyright © 2013 John Wiley & Sons, Ltd.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (43) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/

Related works:
Working Paper: Is economic recovery a myth? Robust estimation of impulse responses (2011) Downloads
Working Paper: Is Economic Recovery a Myth? Robust Estimation of Impulse Responses (2011) Downloads
Working Paper: Is Economic Recovery a Myth? Robust Estimation of Impulse Responses (2010) Downloads
Working Paper: Is Economic Recovery a Myth? Robust Estimation of Impulse Responses (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:29:y:2014:i:3:p:497-514

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-08-20
Handle: RePEc:wly:japmet:v:29:y:2014:i:3:p:497-514