Bank of England: Picking the Right Tools for Macroeconomic Model Estimation (Explained)

This episode breaks down a recent Bank of England working paper, exploring the best econometric methods for accurately estimating structural parameters in complex economic models. We demystify Local Projections (LP) versus Vector Autoregressions (VAR), and compare Impulse Response Function (IRF) matching with Indirect Inference. Discover why Indirect Inference is often the more robust and reliable approach for central banks and researchers. This episode explains a real academic paper in plain English for a general audience. Source paper: Local Projections vs. VARs for - Bank of England https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2025/local-projections-vs-vars-for-structural-parameter-estimation.pdf Keywords: DSGE models, Econometrics, Macroeconomics, Indirect Inference, VAR models, Local Projections