In this paper, we propose a simple approach to estimate impulse response function through smoothed local projections, thereby utilizing the flexibility of local projections, while creating smooth and economically plausible impulse response functions as provided by VARs. The approach allows to determine the appropriate degree of smoothing endogenously through a standard information criterion. This also avoids oversmoothing and provides an estimator that is generally more efficient than standard local projections.
Local projections, semi parametric estimation, smoothing, impulse response function
El-Shagi, M.: A simple estimator for smooth local projections, Applied Economics Letters (forthcoming)