I am running a Local Projections model to try and estimate how household net worth affects the effectiveness of monetary policy. My code for the the LP model is as follows:
locproj log_real_gdp, hor(12) shock(l.fed_rate) controls(l(1/4).log_hh_networth l(1/4).log_gdp_deflator l(1/4).spread l(1/4).log_exchange_rate) met(newey) hopt(lag) ylags(4)
The dependent variable is log_real_gdp and the shock is the fed funds rate lagged one period back. The controls all contain 4 lags.
I want to interact this model with a dummy variable that takes on a value of 1 for low household net worth cycles and 0 for high household net worth cycles.
I generated my dummy variable as follows:
tsfilter hp m = log_hh_networth, smooth(1600) trend(networth_growth)
gen low_hhnw = 0
replace low_hhnw = 1 if m < 0
How would I then interact the lagged dummy variable with the model above so I can uncover monetary policy effectiveness depending on the household net worth state?
locproj log_real_gdp, hor(12) shock(l.fed_rate) controls(l(1/4).log_hh_networth l(1/4).log_gdp_deflator l(1/4).spread l(1/4).log_exchange_rate) met(newey) hopt(lag) ylags(4)
The dependent variable is log_real_gdp and the shock is the fed funds rate lagged one period back. The controls all contain 4 lags.
I want to interact this model with a dummy variable that takes on a value of 1 for low household net worth cycles and 0 for high household net worth cycles.
I generated my dummy variable as follows:
tsfilter hp m = log_hh_networth, smooth(1600) trend(networth_growth)
gen low_hhnw = 0
replace low_hhnw = 1 if m < 0
How would I then interact the lagged dummy variable with the model above so I can uncover monetary policy effectiveness depending on the household net worth state?
