Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296354 
Authors: 
Year of Publication: 
2023
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 14 [Issue:] 4 [Year:] 2023 [Pages:] 1199-1220
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
It is well known that Local Projections (LP) residuals are autocorrelated. Conventional wisdom says that LP have to be estimated by OLS and that GLS is not possible because the autocorrelation process is unknown and/or because the GLS estimator would be inconsistent. I show that the autocorrelation process of LP can be written as a Vector Moving Average (VMA) process of the Wold errors and impulse responses and that autocorrelation can be corrected for using a consistent GLS estimator. Monte Carlo simulations show that estimating LP with GLS can lead to more efficient estimates.
Subjects: 
Impulse responses
local projections
autocorrelation
GLS
JEL: 
C32
C36
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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