Search Results
Working Paper
Dynamic Identification Using System Projections on Instrumental Variables
We propose System Projections on Instrumental Variables (SP-IV) to estimate structural relationships using regressions of structural impulse responses obtained from local projections or vector autoregressions. Relative to IV with distributed lags of shocks as instruments, SP-IV imposes weaker exogeneity requirements and can improve efficiency and increase effective instrument strength relative to the typical 2SLS estimator. We describe inference under strong and weak identification. The SP-IV estimator outperforms other estimators of Phillips Curve parameters in simulations. We estimate the ...
Working Paper
Evidence on the Production of Cognitive Achievement from Moving to Opportunity
This paper performs a subgroup analysis on the effect of receiving a Moving to Opportunity (MTO) housing voucher on test scores. I find evidence of heterogeneity by number of children in the household in Boston, gender in Chicago, and race/ethnicity in Los Angeles. To study the mechanisms driving voucher effect heterogeneity, I develop a generalized Rubin Causal Model and propose an estimator to identify transition-specific Local Average Treatment Effects (LATEs) of school and neighborhood quality. Although I cannot identify such LATEs with the MTO data, the analysis demonstrates that ...
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Robust inference in models identified via heteroskedasticity
Identification via heteroskedasticity exploits differences in variances across regimes to identify parameters in simultaneous equations. I study weak identification in such models, which arises when variances change very little or the variances of multiple shocks change close to proportionally. I show that this causes standard inference to become unreliable, outline two tests to detect weak identification, and establish conditions for the validity of nonconservative methods for robust inference on an empirically relevant subset of the parameter vector. I apply these tools to monetary policy ...
Working Paper
Interest Rate Surprises: A Tale of Two Shocks
Interest rate surprises around FOMC announcements reveal both the surprise in the monetary policy stance (the pure policy shock) and interest rate movements driven by exogenous information about the economy from the central bank (the information shock). In order to disentangle the effects of these two shocks, we use interest rate changes on days of macroeconomic data releases. On these release dates, there are no pure policy shocks, which allows us to identify the impact of information shocks and thereby distill pure policy shocks from interest rate surprises around FOMC announcements. Our ...
Working Paper
The Econometrics of Oil Market VAR Models
Oil market VAR models have become the standard tool for understanding the evolution of the real price of oil and its impact in the macro economy. As this literature has expanded at a rapid pace, it has become increasingly difficult for mainstream economists to understand the differences between alternative oil market models, let alone the basis for the sometimes divergent conclusions reached in the literature. The purpose of this survey is to provide a guide to this literature. Our focus is on the econometric foundations of the analysis of oil market models with special attention to the ...
Working Paper
Individual Social Capital and Migration
This paper determines how individual, relative to community, social capital affects individual migration decisions. We make use of nonpublic data from the Social Capital Community Benchmark Survey to predict multidimensional social capital for observations in the Current Population Survey. We find evidence that individuals are much less likely to have moved to a community with average social capital levels lower than their own and that higher levels of community social capital act as positive pull-factor amenities. The importance of that amenity differs across urban/rural locations. We also ...
Working Paper
Reconstruction Multipliers
Following the 2009 L'Aquila earthquake, financing of reconstruction by the Italian central government resulted in a sharp and unanticipated discontinuity in grants across municipalities that were ex-ante very similar. Using the emergency financing law as an instrument, we identify the causal effect of municipal government spending on local activity, controlling for the negative supply shock from the earthquake. In our estimates, this "reconstruction multiplier" is around unity, and we show that the grants provided public insurance. Economic activity contracted in municipalities that did not ...
Working Paper
Dynamic Identification Using System Projections on Instrumental Variables
We propose System Projections on Instrumental Variables (SP-IV) to identify structural relationships using regressions of impulse responses from local projections or vector autoregressions. Relative to 2SLS with distributed lags as instruments, SP-IV weakens exogeneity requirements and can improve efficiency and effective instrument strength. We describe inference under strong and weak identification. The SP-IV estimator outperforms other estimators of Phillips Curve parameters in simulations. We estimate the Phillips Curve implied by the main business cycle shock of Angeletos et al. (2020) ...
Working Paper
A Robust Test for Weak Instruments with Multiple Endogenous Regressors
We generalize the popular bias-based test of Stock and Yogo (2005) for instrument strength in two-stage least-squares models with multiple endogenous regressors to be robust to heteroskedasticity and autocorrelation. Equivalently, we extend the robust test of Montiel Olea and Pflueger (2013) for a single endogenous regressor to the general case with multiple endogenous regressors. We describe a simple procedure for applied researchers to conduct our generalized first-stage test of instrument strength, and provide fast Matlab code for its implementation. In simulations, our test controls size ...
Working Paper
Facts and Fiction in Oil Market Modeling
A series of recent articles has called into question the validity of VAR models of the global market for crude oil. These studies seek to replace existing oil market models by structural VAR models of their own based on different data, different identifying assumptions, and a different econometric approach. Their main aim has been to revise the consensus in the literature that oil demand shocks are a more important determinant of oil price fluctuations than oil supply shocks. Substantial progress has been made in recent years in sorting out the pros and cons of the underlying econometric ...