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  1. Home
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  3. Journal of Economic Literature
  4. March 2025
  5. Local Projections

Journal of Economic Literature

ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)

Local Projections

  • Oscar Jorda
  • Alan M. Taylor
Journal of Economic Literature
vol. 63, no. 1, March 2025
(pp. 59–110)
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Abstract

A central question in applied research is to estimate the effect of an exogenous intervention or shock on an outcome. The intervention can affect the outcome and controls on impact and over time. Moreover, there can be subsequent feedback between outcomes, controls, and the intervention. Many of these interactions can be untangled using local projections. This method's simplicity makes it a convenient and versatile tool in the empiricist's kit, one that is generalizable to complex settings. This article reviews the state of the art for the practitioner and discusses best practices and possible extensions of local projections methods, along with their limitations.

Citation

Jorda, Oscar, and Alan M. Taylor. 2025. "Local Projections." Journal of Economic Literature 63 (1): 59–110. DOI: 10.1257/jel.20241521

Additional Materials

JEL Classification

  • C32 Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • C33 Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
  • C36 Multiple or Simultaneous Equation Models: Instrumental Variables (IV) Estimation
  • E23 Macroeconomics: Production
  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity