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A regression discontinuity design for categorical ordered running variables with an application to central bank purchases of corporate bonds

Fan Li (), Andrea Mercatanti (), Taneli Mäkinen () and Andrea Silvestrini
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Fan Li: Duke University

No 1213, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We propose a regression discontinuity design which can be employed when assignment to a treatment is determined by an ordinal variable. The proposal first requires an ordered probit model for the ordinal running variable to be estimated. The estimated probability of being assigned to a treatment is then adopted as a latent continuous running variable and used to identify a covariate-balanced subsample around the threshold. Assuming the local unconfoundedness of the treatment in the subsample, an estimate of the effect of the programme is obtained by employing a weighted estimator of the average treatment effect. We apply our methodology to estimate the causal effect of the corporate sector purchase programme of the European Central Bank on bond spreads.

Keywords: program evaluation; regression discontinuity design; asset purchase programs (search for similar items in EconPapers)
JEL-codes: C21 G18 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-ecm
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