Lusompa, Amaze - In: Quantitative economics : QE ; journal of the … 14 (2023) 4, pp. 1199-1220
It is well known that Local Projections (LP) residuals are autocorrelated. Conventional wisdom says that LP have to be estimated by OLS and that GLS is not possible because the autocorrelation process is unknown and/or because the GLS estimator would be inconsistent. I show that the...