The new lpirf command provides local projections of IRFs. Local projections are used in time-series analysis to estimate the effect of shocks on outcome variables. For instance, we might evaluate the effect of an unexpected change in interest rates on a country’s output and inflation rate.
You can type
. lpirf y1 y2
to obtain local-projection estimates of IRFs for y1 and y2. You can add the exog() op????on to es????mate dynamic multipliers, which are responses of endogenous variables to a shock to an exogenous variable.
The new lpirf command works seamlessly with the existing irf commands, allowing you to create graphs and tables of IRFs, orthogonalized IRFs, and dynamic multipliers.
As with linear models mentioned above, robust standard errors are otien important in IRF estimation. Robust and Newey–West standard errors are available.