State-Dependent Local Projections: Understanding Impulse Response Heterogeneity

James Cloyne, Oscar Jorda and Alan Taylor

No 30971, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An impulse response is the dynamic average effect of an intervention across horizons. We use the well-known Kitagawa-Blinder-Oaxaca decomposition to explore a response’s heterogeneity over time and over states of the economy. This can be implemented with a simple extension to the usual local projection specification that nevertheless keeps the model linear in parameters. Using our new decomposition-based approach, we show how to unpack heterogeneity in the fiscal multiplier, an object that at any point in time may depend on a number of potentially correlated factors, including existing economic conditions and the monetary response. In our application, the fiscal multiplier varies considerably with monetary policy: it can be as small as zero, or as large as 2, depending on the degree of monetary offset.

JEL-codes: C54 C99 E32 E62 H20 H5 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-ets
Note: EFG IFM ME
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.nber.org/papers/w30971.pdf (application/pdf)

Related works:
Working Paper: State-Dependent Local Projections: Understanding Impulse Response Heterogeneity (2023)
Working Paper: State-Dependent Local Projections: Understanding Impulse Response Heterogeneity (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30971

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30971

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().