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Local Projection Inference in High Dimensions

Robert Adamek, Stephan Smeekes and Ines Wilms

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Abstract: In this paper, we estimate impulse responses by local projections in high-dimensional settings. We use the desparsified (de-biased) lasso to estimate the high-dimensional local projections, while leaving the impulse response parameter of interest unpenalized. We establish the uniform asymptotic normality of the proposed estimator under general conditions. Finally, we demonstrate small sample performance through a simulation study and consider two canonical applications in macroeconomic research on monetary policy and government spending.

Date: 2022-09, Revised 2023-02
New Economics Papers: this item is included in nep-ecm and nep-ets
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