Directed acyclic graphs (DAGs) provide a transparent framework for encoding causal structures and identifying causal effects. This paper demonstrates how DAGs help specify local projections (LPs) for estimating causal impulse responses. Examples illustrate how graphical rules can be used to...

In macroeconomic models featuring borrowing-constrained agents, the effects of monetary policy depend on the fiscal reaction to interest rate changes. This paper presents new evidence on the dynamic causal effects of U.S. monetary policy shocks on fiscal instruments and estimates a Heterogeneous...