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A Note on Variance Decomposition with Local Projections -- by Yuriy Gorodnichenko, Byoungchan Lee

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We propose and study properties of several estimators of variance decomposition in the local-projections framework. We find for empirically relevant sample sizes that, after being bias corrected with bootstrap, our estimators perform well in simulations. We also illustrate the workings of our estimators empirically for monetary policy and productivity shocks.

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