Seminario "Disentangling sign and size non-linearities"

Miércoles 14/6, 17h

Presentado por Pedro Martínez Bruera
This paper studies nonlinear effects in impulse responses when the data generating process is arbitrary. We focus specifically on two distinct types of non-linearities: those characterized by the sign and size of the shock, which we formally define. We propose a method to test for their presence individually by fitting a local projection augmented with a nonlinear transformation of the shock of interest. Under specific conditions, the regression coefficient identifies sign (size) non-linearities when the nonlinear transformation corresponds to an even (odd) function. We also discuss the causal interpretation of the obtained magnitudes. To illustrate the effectiveness of the proposed method, we apply it to examine oil supply news shocks Kanzig (2021). We find evidence of size non-linearities. The economic interpretation of results differs from the one obtained using standard linear methods.

*Jointly with Tomás E. Caravello

Pedro Martínez Bruera
Ph.D. candidate in Economics, Massachusetts Institute of Technology.
His areas of interest include macroeconomics, econometrics and public economics.

Lugar: Aula SV202 | Campus Di Tella
Contacto: Departamento de Economía