Questions tagged [applied-econometrics]

Use this tag to discuss empirical papers and issues arising when applying theoretical models to data.

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Applying Econometrics to Monetary Economics

I've been given a problem in which I am told that GDP is a function of the supply of money, prices and demand, $$Y = (M/P)^\delta$$ Taking logs, $$log(Y) = \alpha + \beta log(m - p) +u$$ ...
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If I want to add fixed effects for a difference-in-differences analysis, do I have to do a Hausman test first?

For my diff-in-diff specification, which is looking at whether a certain environmental regulation has an effect on exported goods, I was thinking of adding industry fixed effects to my equation. ...
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2x2 Factorial Design - Sample Allocation based on Variance Minimization

I have a 2x2 factorial design but we don't consider interaction, i.e. we don't assign any sample to the interaction cell. This means, we estimate a short-form model. Thus, we have the following ...
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Within-Cluster Correlation

I figured this would be more appropriate on this forum. I came across the following slides after a Google search of cluster-robust uncertainty estimators. On slide 10 the author attempts to ...
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How to determine price per unit and quantity sold of product from financial statement

Situation I hope I'm asking in the right place. I'm writing a paper on the application of quadratic functions in economics and intend to use the Total Revenue function as well as the Profit function ...
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Forecasting integrated variables in a macroeconomic setting

I am trying to measure the effects of restrictions on immigration to a specific country on both real estate rental indices and real estate property price indices during the next 3 to 5 years. As a ...
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comparison of micro production functions

There are many different production function estimation methods, relevant for micro and firm data. For example Olley-Pakes, Levinsohn-Petrin, Ackerberg et al., Wooldridge etc. But does anyone know of ...
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1answer
38 views

Identification strategy for measuring impact of employee turnover on project quality

I am seeking help with identification strategy for figuring out causal direction in the following context: There is a company where project managers (PM) rotate every 3-7 years across the country/...
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What is the optimal forecast for the following moving average model?

Suppose that we have an MA(1) model where $y_t=\epsilon_t-\frac 1 2 \epsilon_{t-1}$ and $\epsilon_t$ are i.i.d. I want to find an optimal forecast of $y_{T+1}$ in the form of $Cy_T$ where C is a ...
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1answer
240 views

How does one deal with trending variables in Linear Regression?

I have a linear regression model with two independent variables that takes the form: $$y_{it} = \beta_{0} + \beta_{1}x_{it} + \beta_{2}z_{it} + u_{it}$$ where $u_{it}$ is the error structure. I want ...
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Cointegration but no Granger causality

Suppose I have two variables - $y_t$ and $x_t$ - which are cointegrated. I believe that (i) $y_t$ responds to deviations from the long-run equilibrium, (ii) the long-run elasticity of $y_t$ with ...
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Annual Fraud Recovery Over Time: Should I adjust for inflation?

I have a dataset of the total amount the U.S. Department of Justice obtained annually in settlements/judgments of government fraud cases from fiscal years 1988-2019. There's a lot of variation, but ...
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Where to find a list of U.S. policy changes for causal studies?

I'm currently trying to figure how the topic of my paper, which is supposed to be related to policy evaluation (causal inference). I thought it would be great if I could first obtain a list of recent ...
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Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
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2answers
25 views

Can you take the moving average of quarterly data of an explanatory variable in a regression to smoothen noise and get more accurate coefficients?

I'm trying to use acceleration of quarterly data on household debt (the difference in the difference in debt) in a regression on unemployment (only concerned with correlation) but quarterly data is ...
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Evaluating the impact of US federal grants

There are a number of challenges with evaluating the impact/effectiveness of federal grants in the U.S. In particular, it's easy to obtain a (somewhat comprehensive) record of transactions between ...
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1answer
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Why are the same set of controls used for both OLS and 2SLS?

I have been reading several papers that use 2SLS. These papers usually also show the OLS regression results. I noticed that when authors report results for 2SLS, they also include control variables ...
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A question about independence of LATE framework (IV)

I came across the assumption of independence of the LATE in 2SLS: My first reaction is, why D1i and D0i are independent of the instrument Zi? Shouldn't the treatment and IV be correlated for the IV ...
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1answer
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Negative correlation conditional variance and return

I've estimated a GARCH for S&P 500, Nikkei and DAX index. The model for the return of S&P 500, the results indicate the return of DAX has an negative effect on the S&P 500 conditional ...
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Is there a specific test for this procedure? (NKPC and coefficient stability)

I'm running a GMM regression in order to estimate a New Keynesian Phillips Curve, with forecasting purpose, and i want to know if there is a testing procedure for the following problem: (i) First i ...
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Econometrics: why the i.i.d assumption and weak exogeneity assumption imply strict exogeneity?

The proposition is from lecture notes of advanced econometrics of Yongmiao Hong: A1: $\{Y_t,X_t'\}_{t=1}^n$ is an i.i.d. random sample. A2: $E(\varepsilon_t|X_t)=0$ almost surely with $E(\...
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Interpretation of coefficients in ECM for consumption

Say that we are regressing consumption $C_t$ on time $Y_t$. Furthermore, suppose that both series are $I(1)$ and are co-integrated. Given this, we set up the error correction model (ECM) as follows: $...
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Is there empirical evidence on usability of Cobb-Douglas production function?

This is my first question at Stack Exchange. I am trying to estimate simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$ on US data and receive an unrealistic estimate of $\alpha$ and a ...
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How to run Panel data analysis when data on the dependent variable is on a 5 year interval basis and that on independent variable is on yearly basis?

I am reading a paper which empirically tests if primary exports affect education attainment in LAC countries over the period 1965 to 2010. It uses percentage of secondary school enrollment as ...
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What are the statistical tests I need to perform before I regress GDP on multiple variables?

I'm using data over 10 countries for the period 1975 to 2010. My objective is to check if the chosen regressors have significant effect on GDP. I have very basic knowledge of econometrics which I ...
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what can be the proxy variable for measure of product innovation?

My objective is to prove that international trade leads human capital formation which leads to economic growth. I am regressing GDP on multiple variables among which Human capital is one. According to ...
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1answer
54 views

The Household Production Function

I was wondering whether someone can explain the household production function (HPF). Specifically, the variant presented in Patanayak et al (2005). The paper uses the HPF to determine household ...
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Performing good forecasts for the GDP

What forecasting models would you recommend to forecast the GDP? Through a quick research I have found that VEC, VAR, SVAR models are the most common. Are they though good forecasters? Or are they ...
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315 views

Cobb-Douglas production function with expenditures rather than units

I want to estimate a standard Cobb-Douglas production function of the form $ Y=AK^{\alpha}L^{\beta}$. However, I only have data on labour expenditures, not units of labour. I don't have data on the ...
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treatment of non-consecutive periods in panel and ʀ SFA

ɪ am estimating a Stochastic Frontier Analysis (SFA estimated by MʟE) model for a panel of seven periods. ɪ want to know if ɪ can use all the periods in the estimation procedure and how are they ...
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1answer
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Is measurement error in self-reported health a problem in this scenario…?

I am running regressions to estimate the impact of health conditions on life satisfaction. I have read a paper that showed that there is likely to be measurement error in the self-reported health ...
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What is the interpration of results if adding or subtracting a control variable effects the significance of explanotary variables?

I am conducting some regressions on economic growth determinants and I am disillusioned. Essentially by choosing what groups of variable to regress I can get the desired significance. What does this ...
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Regression analysis with interaction and decomposed main effect

I'm trying to figure out if I need to include the main effect in a regression analysis with an interaction if I am already including a decomposed version of the main effect. For example, let: ...
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1answer
38 views

Building a time-series demand forecasting model

I am forecasting demand for certain types of goods and services, which I expect to be correlated to a sub-set of a basket of macroeconomic indicators (considering 15-20 indicators) I do not know ...
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Estimating CES utility (not production) function parameters

The CES utility function has the form \begin{equation} u(x_1,\dots,x_n)=\left[\sum_{i=1}^n\alpha_ix_i^\rho\right]^{1/\rho}, \end{equation} where $\alpha_i$ is the consumption share parameter and $\...
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is there a difference between E[e|x]=0 and E[e|d=1]-E[e|d=0] in continuous vs discrete case in regressions?

in the discrete case, if assignemt is random, then i can express E[y|d=1]-E[y|d=0] = B + E[e|d=1]-E[e|d=0], where the expectation of the errors are the same for both groups and become zero. Where I am ...
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Should I include lags in an LLC unit root test?

I have panel data (N = 10, T = 20), which I intend to run a series of regressions on. I first want to see if my data are stationary in levels or in differences. To do this, I have been performing ...
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1answer
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How to predict income n years after graduation using income dataset with age, but not graduation year?

I'm trying to predict the income of graduates of certain Master's programs n years after graduation, using the American Community Survey individual level dataset to calibrate my equation. It gives me ...
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2answers
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Why hasn't the huge increase in supply provided by Airbnb decreased prices?

Simple supply and demand economics would suggest that the huge increase in the supply of rooms to rent by Airbnb should have reduced the price of rental significantly in those cities where Airbnb is ...
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Engel’s Coefficient Data

Does anyone know of any good data sources where we can find Engel’s Coefficients by nation?
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Econometrics: Is it feasible to use the “effect of the treatment” estimations from a diff-in-diff as dependent variable?

Basically I have many treated units and I would like to estimate (by applying the Diff-in-Diff methodology) the effect of the treatment. In my particular case it's very likely to observe certain ...
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31 views

Vector Autoregressions

Suppose running a VAR system featuring the central bank interest rate, inflation and GDP. Start by estimating each equation by OLS. How should you interpret the OLS residuals to these equations? My ...
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Mankiw, Romer & Weil: Estimating Implied Alpha & Beta

I am replicating Mankiw, Romer & Weil (1992) with data from 1995 through 2015, and I wondering how they estimated the implied alpha and beta. Thank you, For those curious, the paper can be found....
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1answer
682 views

What is a good proxy for government quality?

Is it ok to use corruption as a proxy for government quality?
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When using OLS is it always necessary to drop the weak and insignificant variable? [closed]

Some of my variable shows weak collinear relationship on my dependent variable.. how should I address this?
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VAR model OLS line by line

I am estimating a VAR model line by line. Lets say the conditional variances are correlated. We would expect size distortion. So we would use another method, perhaps a HAC standard error to account ...
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How should I rebase my GDP?

I have a constant GDP data from 1988 to 2009 in constant 1985 prices and GDP data from 2009 to 2017 in constant 2000 prices. My question is how should I rebase my GDP? Upon searching the web, i don'...
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129 views

Synthetic Control Method

I need to study Synthetic Control Method for my term paper. So can anyone suggest some book/literature from where I can study Synthetic Control Method on my own?.
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2answers
48 views

What is the tolerable level for multicollinearity? and possible remedial measures for it?

My data has issues of multicollinearity. Upon estimating, I found out that my data have high levels of VIF In however I was confused as to what level of VIF can I possibly ignore the issue of ...
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Transformation of cutpoints in Ordinal Probit/Logit regression

The likelihood for an ordinal probit/logit regression model is given as - $f(y|\beta ,\gamma ,z ) = \prod_{1}^{n} \left [ \Phi (\gamma _{j} - x_{i}'\beta ) - \Phi (\gamma _{j-1} - x_{i}'\beta ) \...