English

Quasi-Bayesian Local Projections: Simultaneous Inference and Extension to the Instrumental Variable Method

Econometrics 2026-05-19 v4

Abstract

Local projections (LPs) are widely used for impulse response analysis, but Bayesian methods face challenges due to the absence of a likelihood function. Existing approaches rely on pseudo-likelihoods, which often result in poorly calibrated posteriors. We propose a quasi-Bayesian method based on the Laplace-type estimator, where a quasi-likelihood is constructed using a generalized method of moments criterion. This approach avoids strict distributional assumptions, ensures well-calibrated inferences, and supports simultaneous credible bands. Additionally, it can be naturally extended to the instrumental variable method. We validate our approach through Monte Carlo simulations.

Keywords

Cite

@article{arxiv.2503.20249,
  title  = {Quasi-Bayesian Local Projections: Simultaneous Inference and Extension to the Instrumental Variable Method},
  author = {Masahiro Tanaka},
  journal= {arXiv preprint arXiv:2503.20249},
  year   = {2026}
}

Comments

This paper is superseded by arXiv:2605.15966.

R2 v1 2026-06-28T22:34:43.585Z