Questions tagged [econometrics]

Econometrics is the application of statistical methods to economic data for various purposes such as of testing hypotheses, infering causal relationships and forecasting future trends. Only use this tag for questions relating to the theoretical aspect of an econometric technique.

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Risk aversion using multinomial choice model

Recently, I have stumbled upon this paper by R. Zhang. It introduces binary choice model to compute risk aversion equations for the natural selection process. My idea is to do something similar but ...
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Suitable econometric specification for my data

I'm playing around with my dataset and as a start, I want to understand whether the absenteeism and vaccination rates for employees across a large number of factories with separate units is dependent ...
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How to understand the components of exchange rate return calculation in an international study?

From reading a paper of (Han 2020), I saw the equation (3) as below $$π_{i,t+h} = [(p_{t+h} - p_{t}) - (p_{t+h}^* - p_{t}^*)]*100$$ As they describe, $p_{t+h}$ and $p_{t+h}^*$ denote the logarithm of ...
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What does New Trade Theory say about the effect of trade on (income) inequality?

The Heckscher-Ohlin model and Stolper-Samuelson theorem make predictions about the effects of trade on the distribution of income within countries. What does New Trade Theory say about this?
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How to assess the quality of a forecast?

Let's say I have a time series model (VAR model for example). How can I know that my forecast is good ? I could use the R2 but is there something else? I also know I could just use in sample ...
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Which variable keep/get rid in a time series model?

Let s say I have a big VAR model with many variables. Then I run the model. How can I know which variables I should keep or get rid of if I want to ameliorate my model ? What if my model has so many ...
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4 votes
3 answers
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What are the economic peer-reviewed journals devoted to literature review?

I am looking for economic/econometrics journals committed to publish just (or mainly) literature review. So far I've found: Journal of Economic Literature Journal of Economic Surveys What are some ...
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3 answers
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Do anticipation effects almost always bias the DiD ATE or ATT towards a null result and increase standard errors?

I am trying to implement a difference in difference model. Suppose that some treated units anticipate the treatment. Then, that would mean that they respond to the treatment prior to the treatment ...
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Multiple regression and "holding variables fixed"

Suppose that we regress a variable $Y$ on two independent variables $X_1$ and $X_2$. Since we have included $X_2$ in the regression, the obtained $\hat{\beta_1}$ coefficient is often said to be the ...
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Inverse relationship of deposit volume to deposit rate and exchange rate of deposit currency

I have data on short-term (2 months) deposits, which show an inverse relationship between the volume of deposit replenishment to the deposit rate and the exchange rate of the deposit currency. We can ...
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High Kurtosis with normal Distribution

I need help. Here is my problem, I am testing normal distribution on covid, 2008 crisis, and beetween these. So I have 3 timezone and 7 indexes. When I use SPSS to test the normal distribution with ...
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1 answer
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How to explain the coefficients in the marginal effects of Logit regression?

I am asked to interpret the coefficients of the specification showed the marginal effects of Logit regression. I am wondering if there is any reference for this work. I am finding a link that is quite ...
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consistency and unbiasedness of ols estimator

Please explain why the OLS estimator is consistent and unbiased withregard to the equation below \begin{equation} \label{eq:1} C_{t} = \beta_{1} + \lambda C_{t-1} + \epsilon_{t} \end{equation}
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calculating the LM test statistic and P value

Include the LM test, Questions: 1. What regression would be needed to test the null hypothesis of no autocorrelation in the residuals against the alternative of order 1 autocorrelation by the Breusch-...
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1 vote
1 answer
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Checking negativity condition in demand system model

Let's assume you want to estimate a demand system model, e.g. the AIDS, based on observational data. Then you usually test first whether the homogeneity and symmetry condition hold in order to check ...
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When can I assume that a variable is exogenous?

I'm looking for the effect of nutritional coffee breaks on MBA performance, and I found that the change to a healthier catering increased the performance of MBA students. Additionally, I want to see ...
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1 answer
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What does it mean to control for a variable?

Let's say I want to see the effect of having a pool on the price of properties in a city. What does it really mean to control for zipcodes? And does this answer the crucial question that I want to ...
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error specification of OLS regression models

Consider the following regression equation * \begin{equation} \label{eq:1} C_{t} = \beta_{1} + \lambda C_{t-1} + \epsilon_{t} \end{equation} and let \begin{equation} \label{eq:3} \epsilon_{t} = \rho\...
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lagged regression equation properties

consider this equation 1: \begin{equation} \label{eq:1} C_{t} = \beta_{1} + \lambda C_{t-1} + \epsilon_{t} \end{equation} If the error term is independently and identically distributed (iid) with ...
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5 votes
1 answer
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Equation 3.3.8 in Mostly Harmless Econometrics

Suppose that $S_i$ is continuously distributed, not necessarily non-negative. The conditional expectation function of interest is $h(t):=E[Y_i|S_i=t]$ has derivative $h'(t)$. Equation 3.3.8 of Mostly ...
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3 votes
1 answer
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Difference between M-estimators and Minimum Distance estimators

I was reading Chapter 22 of Hansen's Econometrics on M-estimators and he lists OLS, Non-linear LS and Maximum Likelihood as examples of M estimators. After a few paragraphs, he also writes "[...] ...
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2 votes
1 answer
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Instrumental variable analysis for non-linear endogenous variable

I have a model of the form $$y_i = ax_{1i} + bx_{1i}^2 + cx_{3i} + \varepsilon_i$$ Where $x_1$ is an endogenous variable. Would I need instruments for both $x_1$ and $x_1^2$ or do I only need to ...
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Labor economics / econometric survey on employee satisfaction surveys

I'm a neophyte to the domain, so I would like to learn from survey-type resources that focus on labor economic / econometric analyses of "employee satisfaction surveys." Quotations for "...
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3 votes
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How did econometricians justify the use of $EU$ instead of $EU^2$?

Consider the following two utility functions: $EU(p)=\sum_i u_ip_i$ $EU^2(p)=(\sum_i u_ip_i)^2$. In preference theory, $EU$ and $EU^2$ are equivalent because they represent the same preference. A ...
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Wald Statistic with heteroskedasticity on asymptotic inference vs exact inference

I was working on the following proof but I got stuck. I'm trying to show that the next equality holds: $$(X'X)^{-1}X'\mathbb{E}_n[\varepsilon\varepsilon']X(X'X)^{-1} = \mathbb{E}_n[XX']^{-1}\mathbb{E}...
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2 votes
2 answers
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Discontinuous function $U$ with continuous preferences can be written as a composition of discontinuous & monotone function and a continuous function

Conjecture: Every discontinuous utility function $U$ representing continuous preferences can be written as $U = f \circ g$ for some continuous $g$ and discontinuous strictly monotone $f$. The goal is ...
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1 vote
1 answer
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calculating a marginal effect for logit model

For the logit estimate of the slope parameter,I would like to obtain the marginal effect of the regressor ndisease evaluated at $\Lambda (x'\beta)=\bar{y}$, where $\bar{y}$ is mean of $y$. I obtain ...
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Why does the variable become more significant after I add mediators?

I have 2 models: without mediators and with them. In the second model the variable of interest becomes more significant (the level of significance in model 1 is 5% and in model 2 is 1%). What is a ...
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should I weigh an average net margin calculation of Eurozone banks per number of banks or per asset size to validate parallel trends?

I'm trying to perform a DiD regression analysis in order to evaluate whether bank profitability has decreased with the implementation of a negative interest rate policy (NIRP). The regression is ...
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0 answers
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Loss function to State space

I have a quadratic equation and a loss function and need to write then in a state space format according to a model below. My equation is the following below, where T is the degree of a custom index ...
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Should I do Chi-square or T-test before running a regression?

In many articles before running a regression authors do T-test or Chi-square test to check if there’s a significant difference between the variables in 2 subsamples. In my case variable of interest - ...
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2 votes
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Difference-in differences survival models

I am in a setting where I'd like to estimate the average treatment effect on the treated (ATT) using a cox-proportional hazards model in a DID style setting. I'll adopt the setting of Mastrobuoni and ...
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Why does the variable become insignificant after adding mediators?

I study an impact of long working hours on health. I run ordered logit on women subsample and the dummy variable responsible for working more than 40 hours becomes insignificant after adding mediators:...
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1 answer
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Can I run regression on uneven subsample?

I study the influence of long working hours on health. In my sample 40% of people work more than 40 hours and other 60% don’t. I want to look at the effect of working exactly more than 50 hours ...
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2 votes
1 answer
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Why significant variables become insignificant in subsamples?

I built an ordered logit using a sample of more than 4000 observations and the variable of the interest was significant. But then I split the sample into two subsamples: women and men and the variable ...
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Regression and Kuznets curve

The dependent variable, Gini (C) has the coefficient and probability value of $(38.934, 0.0000)$. The independent variables: GDP,...
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1 vote
1 answer
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Pooled OLS, fixed effects and random effects yield very similar results

I have used pooled OLS, fixed effects and random effects to estimate a model and the results are as expected. I expected coefficients to differ quite significantly for the different techniques and ...
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2 votes
1 answer
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Why did Heckman sample selection models fall out of fashion?

Nowadays most people run wage regressions conditional on being employed rather than using Heckman selection models. So what are its drawbacks and why did this approach fall out of fashion?
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Instrumental Variables - Exogeneity Tests using region characteristics

I am using IV methods to establish the causality, I want to run some exogeniety tests. I have been going over Woolridge (Econometric Analysis of Cross Section and Panel Data, 2010) and I am not ...
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Is there a difference between right-tailed ADF and standard ADF test?

Is there a difference between right-tailed ADF and standard ADF tests in Eviews?
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1 answer
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BA in econometrics with mathematics vs BA in econometrics with computer science [closed]

Uni applications start quite soon and I have a hard time deciding which degree should I choose. I’m more interested in mathematics than in CS. However, it isn’t my greatest strength. I was thinking ...
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Lower Triangular Factorization with Additional Zero Restriction

Consider the the following VAR(1) regression \begin{align*} \mathbf{y}_t = \mathbf{B}\mathbf{y}_{t-1} + \mathbf{\varepsilon}_t \end{align*} with the corresponding residual variance-covariance matrix \...
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1 vote
1 answer
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Estimating parameters when introducing IV Instrument

Say, you have a model $$ y_{it} = \beta_1 a_{it} + \beta_2 b_{it} $$ And you find that $a_{it}$ is endogenous, therefore, you need to find an instrument for it. Say you find an instrument $z_{it} = \...
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2 votes
1 answer
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What level should I cluster my standard errors at?

I want to estimate the following model: $Y_{ismr} = \alpha + \gamma O_{sm}+\beta X_{smr} + \epsilon_{ismr}$ , where $Y_{ismr}$ is customer $i$'s reported level of satisfaction at store $s$ in market $...
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1 vote
1 answer
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Cross validation as a means of validating fixed effects?

To test whether it is appropriate to even use certain types of fixed effects, would it ever be appropriate to use a cross-validation methodology? Let's say that I have this type of mental model: $$\...
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3 votes
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Structural Estimation, Simulations, and Initial Values

I want to estimate model parameters and fear about the impact of initial values of simulations. Short model overview Consider a firm producing a homogeneous output good whose output price, $P_t$, is $...
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2 votes
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A conceptual question about the limitation of the MA processes

We know that linear time-series techniques are frequently used in macroeconometrics. The Wold Representation Theorem states that any covariance-stationary process may be expressed as an MA process ...
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Time series: predicting covariates for missing years from historical values

I'm working with a time-series dataset where my dependent variable is measured annually from 2018-2021 but my covariates are not all measured over the same period. For instance, $x_1$ is measured from ...
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2 votes
2 answers
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What does Zero Mean Error mean?

I am working on a question where I have derived a general pattern for my variable of interest $x$ in terms of the error term $u$ across time: $x_t = \sum_{i=0}^{\infty} u_{t+i}$. The only information ...
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3 votes
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How to measure mental accounts of an individual?

I wonder whether its possible to identify mental accounts as defined by Richard Thaler https://www.jstor.org/stable/183904 given i observe consumption and/ or investment behavior of an individual? I ...
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