Title: Time-varying local projections-IV
Authors: Germano Ruisi - Central Bank of Malta (Malta) [presenting]
Abstract: In recent years local projections have become a more and more popular methodology for the estimation of impulse responses. Besides being relatively easy to implement, the main strength of this approach, relative to the traditional VAR one, is that there is no need to impose any specific assumption on the dynamics of the data. In addition, the recent applied literature has also developed several instruments aiming at identifying several macroeconomic shocks of interest. Local projections-IV in a time-varying framework are modeled, and a Gibbs sampler routine is provided to estimate them. A simulation study shows how the performance of the algorithm is satisfactory while the usefulness of the model developed here is shown through an application to fiscal policy shocks.