xtlp: A new Stata command for panel local projection

Shu Shen, Ziwei Mei, Liugang Sheng and Zhentao Shi

Papers from arXiv.org

Abstract: Panel local projection (LP) estimated with fixed effects (FEs) is widely used to evaluate the dynamic effects of economic shocks across countries or regions. However, FE estimation of panel LP models is subject to Nickell bias arising from the predictive structure of LP specifications, even when lagged dependent variables are not included in the regressors. This bias invalidates standard inference based on conventional t-statistics. We introduce xtlp, a new Stata command that implements panel LP with split-panel jackknife (SPJ) bias correction. It removes the Nickell bias and restores the validity of standard statistical inference. The command accommodates a broad range of specifications, including different transformations of the dependent variable, additional control variables, and flexible variance estimators. We illustrate xtlp through empirical applications that examine the effects of financial crises on output.

Date: 2026-10
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2610.41428

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