Model Selection in Bayesian Local Projections
Published:
This paper presents a method for jointly estimating local projections when working with panel data. I use the S⁴ model selection routine of Koop and Korobilis (2016) to illustrate how cross-sectional heterogeneity, dynamic interdependencies, and static interdependencies can be jointly estimated with local projections, and compare the resulting impulse responses with those from an analogous panel VAR.