Dynamic effects of persistent shocks

Mario Alloza and Carlos Sanz
Authors registered in the RePEc Author Service: Jesus Gonzalo

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We provide evidence that many narrative shocks used by prominent literature display some persistence. We show that the two leading methods to estimate impulse responses to an independently identified shock (local projections and distributed lag models) treat persistence differently, hence identifying different objects. We propose corrections to re-establish the equivalence between local projections and distributed lag models, providing applied researchers with methods and guidance to estimate their desired object of interest. We apply these methods to well-known empirical work and find that how persistence is treated has a sizable impact on the estimates of dynamic effects.

Keywords: Impulse; response; function; Local; projection; Shock; Fiscal; policy; Monetary; policy (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 E62 (search for similar items in EconPapers)
Date: 2025-01-10
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Related works:
Working Paper: Dynamic Effects of Persistent Shocks (2020)
Working Paper: Dynamic effects of persistent shocks (2019)
Working Paper: Dynamic Effects of Persistent Shocks (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:45381

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