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The Sine Aggregatio Approach to Applied Macro

We develop a method to use disaggregate data to conduct causal inference in macroeconomics. The approach permits one to infer the aggregate effect of a macro treatment using regional outcome data and a valid instrument. We estimate a macro effect without (sine) the aggregation (aggregatio) of the outcome variable. We exploit cross-series parameter restrictions to increase precision relative to traditional, aggregate series estimates and provide a method to assess robustness to modest departures from these restrictions. We illustrate our method via estimating the jobs effect of oil price changes using regional manufacturing employment data and an aggregate oil supply shock.

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https://doi.org/10.20955/wp.2022.014