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.
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This paper is superseded by arXiv:2605.15966.