Local Projections for Applied Economics

2023-16 | July 1, 2023

The dynamic causal effect of an intervention on an outcome is of paramount interest to applied macro- and micro-economics research. However, this question has been generally approached differently by the two literatures. In making the transition from traditional time series methods to applied microeconometrics, local projections can serve as a natural bridge. Local projections can translate the familiar language of vector autoregressions (VARs) and impulse responses into the language of potential outcomes and treatment effects. There are gains to be made by both literatures from greater integration of well established methods in each. This review shows how to make these connections and points to potential areas of further research.

Article Citation

Jorda, Oscar. 2023. “Local Projections for Applied Economics,” Federal Reserve Bank of San Francisco Working Paper 2023-16. Available at https://doi.org/10.24148/wp2023-16

About the Author
Òscar Jordà
Òscar Jordà is a senior policy advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Òscar Jordà