How to create impulse response after local projection?

[Prabha Neupane]

I am trying to estimate fiscal multiplier with local projection with IV but I couldn't create graph and cumulative multiplier too. Please help.

The code I used are:

* Import Data
import excel "C:\Users\absol\Downloads\data set (1).xlsx", sheet("Sheet4") firstrow
tsset Date, yearly
sort Date

* Normalize variables by potential GDP
gen milshock = military_spending / potential_gdp // Fix potential typo in original variable name
gen y = real_gdp / potential_gdp
gen g = gov_spending / potential_gdp

* Generate cumulative sums for forecast horizons
gen cumuly = y
gen cumulg = g

forvalues h = 1/20 {
gen double f`h'cumuly = F`h'.y + L.cumuly if !missing(F`h'.y) & !missing(L.cumuly)
gen double f`h'cumulg = F`h'.g + L.cumulg if !missing(F`h'.g) & !missing(L.cumulg)
}

* Fix missing values using linear interpolation
foreach var in milshock y g {
replace `var' = (L.`var' + F.`var') / 2 if missing(`var') & !missing(L.`var') & !missing(F.`var')
}

* Ensure no missing values for main variables
drop if missing(milshock) | missing(g) | missing(y)

* Instrument correlation check
correlate milshock L1.milshock L2.milshock L3.milshock

* Define instrument set
local instr milshock L1.milshock L2.milshock L3.milshock

* Initialize storage variables
gen multiplier = .
gen stderr = .
gen kleibergen_papp = .

* Run IV regressions for horizons 1-5
forvalues h = 1/5 {
capture noisily ivreg2 cumulg (F`h'.cumulg = `instr'), robust bw(auto) first
if _rc == 0 {
replace multiplier = _b[F`h'.cumulg] if _n == `h'
replace stderr = _se[F`h'.cumulg] if _n == `h'
scalar kp_stat = e(widstat)
replace kleibergen_papp = kp_stat if _n == `h'
}
}

* Prepare data for impulse response plot
gen upper = multiplier + 1.96*stderr
gen lower = multiplier - 1.96*stderr
gen horizon = _n

* Create impulse response graph
twoway (connected multiplier horizon, lcolor(navy) mcolor(navy) msymbol(D)) ///
(rcap upper lower horizon, lcolor(maroon) lwidth(0.8)), ///
xtitle("Years After Shock", size(medsmall)) ///
ytitle("Fiscal Multiplier", size(medsmall)) ///
title("Impulse Response of Fiscal Multiplier", size(medlarge)) ///
legend(order(1 "Point Estimate" 2 "95% CI") pos(6) rows(1)) ///
xlabel(1(1)5, grid) ylabel(, grid) ///
yline(0, lcolor(gs8) lpattern(dash)) ///
plotregion(color(white)) graphregion(color(white)) ///
note("Instrument: Military Spending Shocks", span)

* Display numerical results
list horizon multiplier stderr kleibergen_papp if _n <=5, sep(0)


This is the error I am getting.

. * Create impulse response graph

.
. twoway (connected multiplier horizon, lcolor(navy) mcolor(navy) msymbol(D)) ///
/ / / is not a twoway plot type
r(198);

.
. (rcap upper lower horizon, lcolor(maroon) lwidth(0.8)), ///
( is not a valid command name
r(199);

.
. xtitle("Years After Shock", size(medsmall)) ///
command xtitle is unrecognized
r(199);

.
. ytitle("Fiscal Multiplier", size(medsmall)) ///
command ytitle is unrecognized
r(199);

.
. title("Impulse Response of Fiscal Multiplier", size(medlarge)) ///
command title is unrecognized
r(199);

.
. legend(order(1 "Point Estimate" 2 "95% CI") pos(6) rows(1)) ///
command legend is unrecognized
r(199);

.
. xlabel(1(1)5, grid) ylabel(, grid) ///
command xlabel is unrecognized
r(199);

.
. yline(0, lcolor(gs8) lpattern(dash)) ///
command yline is unrecognized
r(199);

.
. plotregion(color(white)) graphregion(color(white)) ///
command plotregion is unrecognized
r(199);

.
. note("Instrument: Military Spending Shocks", span)
type mismatch
r(109);

Thank you in advance

[Prabha Neupane]

i am working on stata 17

[Chen Samulsion]

Did you run this code in Command window? or in Do-file Editor?
/// lets you split long lines across multiple lines in the do-file, you may not use them interactively.