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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.

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Testing for the significance of an event

I would like to conduct a similar t-test to the one done in the following paper Ranaldo and Rossi (2007) see Table 4.1. However I only have daily data not intraday data. I have daily data for the ...
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22 views

Bias in an Autoregressive Model

In Stock and Watson 3E.Updated, they posit in chapter 14 that if we estimate an Autoregressive equation using an AR(1) $$ y_t = \beta_0 + \beta_1 y_{t-1} + \varepsilon_t $$ where in fact the true ...
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Advance Microeconomics [on hold]

Show that u=a+bM-yM^2 represents a risk averter's utility function who is interested only in the mean and the variance of the state distribution of Income M. Can anybody send me the full solution. ...
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9 views

what is the author trying to say here about differences in borrowing patterns between countries

I don't quite understand what the author is saying. Specifically what theory is meant in the phrase "But one clear observable implication, which is required in order for all that theory to fit ...
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16 views

How do I find long run competitive price and total quantity supplied (in economics)

I was just wondering how to solve a for a firms long run price and quantity supplied in economics! Thank you.
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53 views

A Perfectly Elastic Problem

A regression is of linear form y = bo + b1x1 + e It denotes house prices (dependent) on square-feet (independent) which are graphed on Y and X axis' respectively. Marginal effects measure a slope's ...
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11 views

Need help with positive autocorrelation panel data

Im working on panel regression for school, using 45 cross-sectional (countries) over a 3 year period ('05,'10,'15), 118 observations and 5 independent variables (including const). When running the ...
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Struggling with econometrics and hypothesis testing [closed]

So I've been looking at this homework for hours and cannot figure it out. Any help would be appreciated! When is the rule of thumb for significance, t > 2 , be precisely the same as a formal test for ...
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8 views

Transforming panel data OLS into cross-sectional economic data model

I am currently stuck on a task where I am interested in estimating the production function for agricultural output using panel data as follows: \begin{equation} y_{it} = x_{it}\beta + \alpha_i + \...
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1answer
18 views

Validity condition for Instrumental Variables

My professor states the validity condition in the following way: $W$ (the matrix of instrumental variables) must be such that $ \text{plim} \, \frac{W'u}{N}=0$, where $u$ is the error term. ...
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What is the elasticity of the replacement between factors of production?

Following the work of Lu (1967) (Full text available here!) I got stuck trying to derive the elasticity of substitution between factors. He use the formula developed by Allen, that when the production ...
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1answer
45 views

Statistical Learning and Econometrics

The principal goal of Econometrics is to find causal effects between economic variables. But the growing technology level seems to show us that Big Data and Statistical Learning result in a tradeoff ...
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What is the difference between GLS and 2SLS (2 stage least squares)

I understand the Feasible GLS has two steps but what is the difference (properties) between theoretical GLS, FGLS and Two stage least squares regression.
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25 views

Profit maximization problem using linear regression (pooled OLS)

I'm currently on a university assignment where I'm stuck more or less in the middle. I have to answer the following problem: Suppose you are interested in estimating the production function for ...
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1answer
31 views

Plim of ols estimator

Suppose you are given 2 models. Model of 1 has $y$ as the dependent variable and $x$ as the independent. Model 2 has $w$ as the dependent variable and $x$ as the independent variable. Both models have ...
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13 views

Threshold model with GARCH in R or Matlab

I'm still new to R and Matlab so this may be an easy question; thank you for your help in advance. I want to model a financial series as having an endogenously estimated regime-switching threshold ...
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24 views

Whats the rationale for using taylor series in economics?

I've been reading about the translog production function and know its really just a log-log production function approximated using a first order maclauren series. Why not just leave the function as ...
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1answer
19 views

Analyzing vast economic/financial data

I have data science projects coming up in a university course in the upcoming quarters, and I was interested in using financial/economic data since there is so much of it. Also, I do have a hobby for ...
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Expectation conditional on a sum of random variables

The setting is a simple OLS regression where the true model has regressor $x$ and error term $u$, but we can only measure $\bar{x}=x+v$ where $v$ is iid with mean 0. According to the textbook: $\...
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8 views

Why having Silver/Gold cover can be bad for bankers?

I was randomly reading on the assassination of John Kennedy. And I found that some of the possible reasons why he was assassinated, is because he was planning to issue some kind of silver cover. Such ...
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19 views

First Order Condition - Farm Household Model

Does anyone can help me solve this simple farm household model from the Paper "Delinking land rights from land use: Certification and migration in Mexico" De Janvry 2015. When I do $\frac{dU}{dhe}$ ...
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1answer
36 views

Does omitted variable bias 'contaminate' coefficients for regressors not correlated with the omitted variable?

Suppose we have a model that is: $$ y = X_1\beta_1 + X_2\beta_2 + X_3\beta_3 + \varepsilon $$ where $X_1$ is independent of $X_2$ and $X_3$ but $X_2$ and $X_3$ are correlated with each other. ...
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Measuring of neighborhood effects by focusing on locally born inhabitants

Neighborhood effects are often scrutinized w/o paying attention to endogeneity. For my master thesis I wanted to analyse neighborhood effects on the outcomes of immigrant integration in Germany. ...
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35 views

How to manage lagged expectations of current values in econometric models or current expectations for future values

I have a question, I think elementary but it has to me stoped, about expressions like $E_{t-1}X_t$ or $E_t X_{t+1}$ or $E_tX_{t+j}$, $j=1,2,\dots$. I know that $E_{t-1}X_t = E(X_t|I_{t-1})$ where $...
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How do I measure effects over years in panel data with individuals?

I'm working with a longitudinal panel dataset that surveys the same few thousand individuals biennially and I have six years of this data. My dependent variable would be how much individuals spend on ...
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26 views

Asymptotic variance under heteroskedasticity

I want to find an expression for the asymptotic variance of the OLS estimator given that the errors are heteroskedastic. I have understood the derivation using CLT for the homoskedastic case. I.e., $...
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study methods for first year phd courses in econ

I'd really like some tips on how to master the material for first year phd econometrics (texts: hayashi chap 1 -3, - econometrics, casella and berger 5 - 8th chapter - statistical inference) apart ...
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Helping in understaing new Pesaran and Timmermann test (and R code validation)

I am currently working with Pesaran & Timmermann test version from year 2009. Since I could not find any R package that contains function to calculate it (...
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9 views

Turning points in a regression STATA

What is the Stata command for calculating a turning point in a regression and analyzing how the data is distributed on each side of the turning point?
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1answer
63 views

Calculating standard error

Consider a regression model on the form: $y_{i} = \alpha + \beta_{1}X_{i} + u_{i}$ (1) I am given $var(u_{i}|X_{i}) = 10$ and I know the OLS estimates for $\alpha$ and $\beta$ and using this I have ...
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15 views

Regression Equation for Difference in Differences Test

I am working on a problem, but I am stuck in trying to find the proper term to use in my regression. Basically, here is what I am trying to solve : Say I have a dataset with data from like four or ...
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1answer
44 views

Cholesky Decomposition in R package “vars”

I'd like to know if, when running a VAR model in R (package "vars"), the cholesky decomposition matrix is upper triangular (so I should order my variables from more endogenous to less endogenous), or ...
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Can A/B be a better variable than separate A, B in linear regression?

While learning Econometrics, I got curious to know whether A/B can make a better variable than separate A and ...
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1answer
68 views

Linear Regression Assumptions of Homoskedasticity

When I studied linear regression analysis, one of the assumptions taught was that of homoskedatiscity. I understood that homoskedasticity was required for significance testing on the coefficients. ...
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1answer
62 views

not following a step in a paper on rational expectations

Hi: I'm reading a paper by Broze and Szafarz titled "On Econometric Models with Rational Expectations and I don't follow a step in section 3.2 which discusses the method of undetermined coefficients. ...
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Open-source app to aggregate financial data and plot them?

I didn't find a policy for this site, so I hope this is not off topic. However it fits here more than a programming site. I started coding an open source app that will aim to Gather financial and ...
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1answer
38 views

Augmented Gravity Model

I am currently using the gravity model for my dissertation on migration flows. Do gravity models need to be augmented by dummy variables only or can other explanatory variables (such as the ...
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1answer
60 views

Can there be a sample such that SRF and PRF do not intersect?

I am confused if it is possible for to randomly select a sample such that SRF and PRF do not intersect. I have thought of the concept of parallel lines, which allows for such a case but I am unsure if ...
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1answer
40 views

Translog cost function

Can anyone help to estimate total cost under Translog cost function. I have input output and input cost data. It would be highly appreciated if software demo to estimate the same is given.
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1answer
42 views

Running ols when dependent variable is correlation coefficient

I am new to this form. I am going to run an OLS regression with dependent variable as a correlation coefficient (between -1 and 1). I am aware that this dependent variable may be problematic in the ...
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64 views

How to interpret Mincer equation coefficients

Consider the Mincer model: $\log(y)=b_0 + b_1S + b_2E + b_3E^2+u$ where S is schooling, Y is salary (monthly) and E is experience. I want to verify the following statements: The return for 1 extra ...
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1answer
33 views

Help with undergrad econometric project

I am working on undergrad research in econometrics and am seeking some advice/help in terms of finding data sets and picking variables. I have an idea chosen for my topic, but I need to make a ...
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2answers
59 views

Examples of Covariance Stationary Time Series

I seem to be having trouble in comprehending what it means for a time series to be covariance stationary. Specifically, with the third condition that for any $t,h$ the $cov(x_t,x_{t+h})$ only depends ...
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1answer
41 views

What is an unconditional model for a time series variable?

If I am being asked to do an unconditional analysis of a time series variable, lets say GDP starting in 2000, what model am I supposed to estimate?
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1answer
53 views

Panel Data and Forecasting

I have balanced panel data for around 130 countries, over three years. I ran a fixed effects regression using 'country' as my panel variable, and adding dummies for 'year'. I want to forecast the ...
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Any examples of non-parallelism making Diff-in-Diff estimation biased?

The key assumption in a Differences in Differences design is that both the control and the treatment group have parallel tendencies, that is, they'd follow similar paths over time if there was no ...
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26 views

AR(p) with white noise error term — always covariance stationary?

Is it always true that an AR(p) process with a white noise error will be covariance stationary?
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1answer
96 views

Show that the dividend price ratio is a ARMA(p, q) process

Let the log dividend growth evolve according to $\Delta d_{t+1} = \epsilon_{d, t+1}$ where $\epsilon_{d, t+1}$ is just white noise. Let the log returns be $r_{t+1} = x_t + y_t + \epsilon_{r, t+1}$ ...
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Using capacity share instead of quantity market share in demand estimation (BLP)

If I were to use capacity share (as a proxy of quantity market share) in a demand estimation setup (such as BLP), are there ways to deal or interpret the measurement error? I would consider this ...
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1answer
71 views

What econometrics book or textbook should I use?

I'm doing my Master thesis in economics. I have only a very basic understanding of econometrics, and honestly, I hate it, the same things go for stats and probability etc. Now, at my school my ...