A1325
Title: Quantile local projections: Identification, smooth estimation, and inference
Authors: Josef Ruzicka - Nazarbayev University (Kazakhstan) [presenting]
Abstract: Standard impulse response functions measure the average effect of a shock on a response variable. However, different parts of the distribution of the response variable may react to the shock differently. A popular method to capture this heterogeneity are quantile regression local projections. Structural identification is achieved by short-run restrictions or instruments and asymptotics are established. To overcome their excessive volatility, two novel smoothing estimators are introduced and information criteria for optimal smoothing are proposed. In an empirical application, it is shown that financial conditions affect the entire distribution of GDP growth and not just its lower part. Thus, financial conditions matter not only for recessions, but also in normal times and even for recoveries.
