arXiv subjects

Endong Wang

Publications and source records attributed to Endong Wang.

7 recordsLinked to original sources

arXiv2026

When Does $N$ Buy Precision? Heterogeneous Responses to Aggregate Shocks in Micro Panels

Panel local projections (panel LPs), valued for their flexibility and robustness, are widely used to estimate heterogeneous responses to aggregate shocks from micro data. This paper, however, highlights the potential of panel vector autoregressions (panel VARs) and characterizes the trade-off between the efficiency of panel VARs and the robustness of panel LPs. In contrast to existing results in the time-series literature, we show that under correct specification, panel VAR estimators of the heterogeneous responses converge at rate $(NT)^{-1/2}$, whereas panel LP estimators converge at rate $T^{-1/2}$. When the heterogeneous response function is nonparametric, the panel VAR incurs a nonparametric rate loss, whereas the panel LP retains its parametric $T^{-1/2}$ rate under suitable smoothness and panel-growth conditions. We provide a Hausman-type test for choosing between them, with power against two forms of panel VAR misspecification. We apply panel LPs and panel VARs to Turkish administrative firm-level data to estimate heterogeneous firm responses to monetary policy shocks.

econ.EM↗

arXiv2026

Transmission channels, dynamic mediation, and higher-order impulse responses

Impulse responses measure the total effect of causal changes (or shocks) but do not show how that effect is divided among mediator variables. We use the recursion between Sims and higher-order impulse responses (Dufour and Renault, 1998) to decompose an impulse response into the contributions of mediator variables at every propagation stage. A mediator's contribution is the product of an exposure margin, which measures how the shock moves the mediator, and a propagation margin, the multi-horizon projection coefficients that carry these movements over to the outcome. We show that multi-horizon Granger noncausality from a mediator to the outcome implies a zero propagation margin and that a mediator's contribution equals a controlled mediator-path effect. We provide inference for the contributions and a test of the propagation margin. Applying the decomposition to U.S. oil supply news shocks, we find that consumer-price movements in the first six months make a large contribution to the subsequent decline in industrial production, whereas the contribution of the federal funds rate is small throughout.

econ.EM↗

arXiv2026

Intentionally Overidentifying Local Projections

Local projections (LPs) have become a standard tool for estimating dynamic effects in macroeconomics and are typically implemented using ordinary least squares (OLS) for a given lag order. We propose an alternative approach that exploits additional lags as excluded instrumental variables (IVs). Under a finite-order model with martingale-difference shocks, the resulting (optimally weighted) IV estimator is never asymptotically less efficient than OLS and, as we show, can deliver substantial efficiency gains when data are persistent. For the unit-root AR(1) data with i.i.d. errors, our baseline IV estimator (with one overidentifying restriction) has asymptotic variance $2-h^{-1}$, compared with $h$, the asymptotic variance of the OLS lag-augmented estimator in Montiel Olea and Plagborg-Møller (2021), for an integer propagation horizon $h$. We then develop IV-based LP inference that is robust to unknown persistence and moderate local model misspecification, whereas the recursive VAR-based inference is generally not robust to the latter. We also characterize the trade-off between the degree of misspecification and the number of additional lag controls. Through simulations and an empirical application, we demonstrate that the proposed method can yield meaningfully shorter confidence intervals for impulse responses than OLS in finite samples.

econ.EM↗

arXiv2026

Local projections identify the same policy counterfactuals as empirical and structural models

We study policy counterfactuals that impose path restrictions on a policy instrument over a finite window. Under a sequential intervention design, we define two counterfactual objects, policy-peg impulse responses and policy-path effects, and we provide a novel local projection identification method. Under policy invariance and a linear moving average envelope, the local projection estimands coincide with the counterfactual outcomes implied by empirical vector autoregressions and linearized forward looking structural models, and the counterfactual outcomes are fully characterized by the relevant impulse responses. We also provide local projection identification of both counterfactual objects under an one-shot intervention design. In the empirical applications, we quantify the propagation of an oil-supply news shock under interest-rate pegs and study alternative liftoff paths during the post-pandemic tightening episode.

econ.EM↗

arXiv2026

Sparse VARs Do Not Imply Sparse Local Projections: Robust Inference for High-Dimensional Granger Causality

This paper studies multi-horizon Granger causality using high-dimensional local projections in sparse Vector Autoregressive (VAR) systems. Since local projection coefficients are nonlinear transformations of the underlying VAR parameters, existing approaches, such as de-biased least absolute shrinkage and selection operator (LASSO) and post-double-selection methods applied directly to local projections, lack a general justification, as sparsity of the VAR does not always propagate to higher horizons. We propose a two-step framework that avoids imposing sparsity at each horizon and delivers valid inference without relying on heteroskedasticityand autocorrelation-consistent (HAC) corrections. We establish large sample theory for the proposed estimators and develop feasible Wald tests. Monte Carlo experiments demonstrate improved size control across horizons relative to existing methods. An application to large financial systems illustrates horizon-specific connectedness.

econ.EM↗

arXiv2024

Simple robust two-stage estimation and inference for generalized impulse responses and multi-horizon causality

This paper introduces a novel two-stage estimation and inference procedure for generalized impulse responses (GIRs). GIRs encompass all coefficients in a multi-horizon linear projection model of future outcomes of y on lagged values (Dufour and Renault, 1998), which include the Sims' impulse response. The conventional use of Least Squares (LS) with heteroskedasticity- and autocorrelation-consistent covariance estimation is less precise and often results in unreliable finite sample tests, further complicated by the selection of bandwidth and kernel functions. Our two-stage method surpasses the LS approach in terms of estimation efficiency and inference robustness. The robustness stems from our proposed covariance matrix estimates, which eliminate the need to correct for serial correlation in the multi-horizon projection residuals. Our method accommodates non-stationary data and allows the projection horizon to grow with sample size. Monte Carlo simulations demonstrate our two-stage method outperforms the LS method. We apply the two-stage method to investigate the GIRs, implement multi-horizon Granger causality test, and find that economic uncertainty exerts both short-run (1-3 months) and long-run (30 months) effects on economic activities.

econ.EM↗

arXiv2023

H$_2$ + H$_2$O -> H$_4$O: Synthesizing Hyper-hydrogenated Water in Small-Sized Fullerenes?

Nanoscale confinement provides an ideal platform to rouse some exceptional reactions which cannot happen in the open space. Intuitively, H2 and H$_2$O cannot react. Herein, through utilizing small-sized fullerenes (C$_{24}$, C$_{26}$, C$_{28}$, and C$_{30}$) as nanoreactors, we demonstrate that a hyperhydrogenated water species, H$_4$O, can be easily formed using H2 and H$_2$O under ambient conditions by ab initio molecular dynamics simulations.The H$_4$O molecule rotates freely in the cavity of the cages and maintains its structure during the simulations. Further theoretical analysis indicates that H$_4$O in the fullerene possesses high stability thermodynamically and chemically, which can be rationalized by the electron transfer between H$_4$O and the fullerene. This work highlights the possibility of utilizing fullerene as a nanoreactor to provide confinement constraints for unexpected chemistry.

physics.chem-ph↗