General Seemingly Unrelated Local Projections (opens in new tab)

arXiv:2410.17105v4 Announce Type: replace-cross Abstract: We develop a flexible framework for Bayesian estimation of impulse responses using Local Projections (LPs) with instrumental variables. It accommodates multiple shocks and instruments, accounts for autocorrelation in multi-step forecasts by jointly modeling all LPs as a seemingly unrelated system of equations, defines a flexible yet parsimonious joint prior for impulse responses based on a Gaussian Process, and allows for joint inferen...