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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Clustering Standard Errors for Panel Data

I have a Group-Firm-Year panel data set (i.e., multiple firms make up a group). Suppose I have exogenous variation at the group level over time. In a panel regression with firm and time fixed effects ...
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At what level should I cluster my standard errors and why?

I have a yearly panel data in which each observation is a pair of monitoring stations (stations measuring water quality in rivers) one located upstream and the other downstream, each station in the ...
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Infering instrinic product value from historical price-demand data

This question is somewhat vague : Say we have 100 varieties of apples, each sold in exactly one of 100 marketplaces which are identical (in size, customer budgets, preferences etc) and independently ...
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1answer
35 views

Computing expectation of logit error conditional on choice

Consider a standard multinomial logit choice model. A consumer chooses a good $j$ from a choice set $J$ by choosing the good with the highest realized utility where the utility of good $j$ is given by ...
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30 views

Choosing of an independent variable

I'm working on an estimation of the natural rate and I have as a dependent variable the long term rates and as independent variable the Inflation rate, a dummy variable for the entrance of a country ...
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1answer
48 views

Consistent estimation of fixed effects

Estimating firm fixed effects is very popular in labor economics. I wonder why this is legit? The estimates shouldn't be consistent, the more firms we have the more parameters we have to estimate.
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1answer
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Test which functional form that best explains data

Tried asking this on Math Stack Exchange. Got no answer after a week, so trying here. I had this question in an exam lately and I was not sure how to answer it. Now the exam is done, and I can't go ...
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1answer
30 views

Lasso Double Selection Stata Commands

The Belloni et al. 2014 paper develops the theory of Lasso in post-double selection. There are two commands that appear to me to perform this function: $dsregress$ and $pdslasso$. The $dsregress$ ...
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Where can I find a scientific article that includes cross-sectional data and a multivariate linear regression model?

I need to write a smaller scientific article that consists of the following steps: Find a public database for cross-sectional data (eg data for counties in the same year) Find a scientific article ...
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Taylor rule estimation with OLS serial autocorrelation

I'm estimating the equation: $$i_{t}=\beta_0+\beta_1\tilde\pi_t+\beta_2\tilde y_t+\varepsilon_t$$ Where $\hat\pi_t=\pi_t-\pi^{target}$ and $\hat y=\ln y_t-\ln y^{\ast}$, are the inflation deviations ...
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How can I add distance variable to panel data?

I'm working on a gravity model with a panel data. However, the distance variable for this model is a time-fixed effect so it doesn't seem possible to run the model with it. What can I do to add this ...
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1answer
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What are the values in brackets under the estimators value representing?

Please, can you explain me what are these values in red circles representing?
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Panel estimation coefficient

I'm running both a panel analysis (the first I ever run, to be fair) and a time series analysis over a period of 50 years for twelve countries. In my estimation, one variable has a positive ...
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Dummy variables are removed when estimating first-differences

I am currently getting ready for Econometrics 1 exam and I have some problems deriving the FD estimator sometimes. Lets say we have a data set with the following observations: $FoodAS_{it}$ = food ...
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Identify time vaying variables in VAR

I am having a panel VAR and would like to identify which varaibles remain constant and which vary over time. I have added time varition in the model. I would like to avoid to use bayesian approarch . ...
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What are claims on a central government?

I downloaded some data from the World Bank's World Development Indicators database. I found a time series called Claims on central government, etc (% of GDP) with code ...
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Measuring Aid dependency

I am writing a paper regarding foreign aid dependency, and I would like to classify countries as being aid dependent or independent. Is there any criteria in the literature that can be used to ...
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1answer
48 views

No statistical significance of the TFP growth

I'm conducting an econometric analysis of the natural rate of interest in the euro-area countries using the following variables: as dependent variable I'm using the long term nominal interest rates (i....
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1answer
54 views

Why when a variable $x$ is small, $\log (1+ x) = x$?

I see a conversation here that @dm63 mention that when Age is small, log(1+Age)=Age I am wondering how can it happen. For example, when saying Age is small, I chose Age =1 or 2 Age =1 => log(1+1)=...
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2answers
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Dynamic panel textbook

which books do you recommend for understanding dynamic panel models including Arellano-Bond, System GMM, etc? Ideally intuitive and not too advanced. Thanks :)
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How can we choose the appropriate significance level to interpret based on sample sizes?

With the large sample size, I deem that we can somehow interpret the coefficient significant at 10%, but in the small sample size, we normally ignore the 10% significant level. The issue is that, with ...
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1answer
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Why p-value of coefficients of each variable are insignificant but the overall F is significant is a indicator of multicollinearity?

Today I read a document about multicollinearity here. In the first page, the author runs a simple regression that $y = \beta_1x1+ \beta_2x2$ the p-value( or t-statistic) of coefficients of $x1$ and $...
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0answers
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What is difference between Interrupted Time Series (ITS) and Regression Discontinuity in Time(RDiT) analysis?

Can anyone give some details on the difference between Interrupted Time Series (ITS) and Regression Discontinuity in Time(RDiT) analysis? How to choose between them? which one is more robust? Or some ...
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1answer
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Reference on nonparametric econometrics

I am looking for a fairly recent treatment of non parametric econometric methods. Something which can help me make sense of, for instance Hausman Newey Econometrica 2016 I did find some references on ...
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How to estimate the impact of college lockdown on students performance?

Some researchers have answered the question in their papers, but I was wondering how one would proceed to estimate the impact of college lockdown on undergrad 1st year students performance, if we ...
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1answer
49 views

What does chi p(q) mean?

It is a beginner question but I did not find a good explanation so I am asking here. Hope that I received the help from the community. Today I run a joint null test individually like that ...
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What is the reference for excluding a covariate if there is many missing observation?

Normally, I exclude a covariate out of the regression equation if there are many missing observations, let's say it is one-fifth less observation compared to other variables' observations in general (...
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1answer
33 views

Cholesky Identification in Structural VAR

Can you suggest me a framework in macroeconomics or finance where identification of a Structural VAR model through Cholesky ordering is still considered credible (in your opinion)? I'm looking for a ...
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The quadratic form of variance and covariance components

I am reading Kline, Saggio, Solvsten 2020 and am confused about some basic econometric stuffs in this paper. They begin their introduction as below: """ Consider the linear model $$y_{i}...
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How to justify the result of anticipation effect assumption test?

Regarding Difference-in-Difference, the main assumption is the parallel trend satisfication. Regarding the parallel trend test, just simply prove the joint null test of leads coefficients equalling to ...
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0answers
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What does no anticipation following Athey, 2021?

From a paper of Athey, 2021, Journal of Econometrics, I saw the assumption of no anticipation effect is Assumption 2: For all units i, all time periods t , and for all adoption dates $\alpha$ , such ...
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How to test anticipation effect in Diff-in-Diff following Borusyak, 2021?

In general, two most important assumptions that all Difference-in-Differences must satisfy are "no anticipation effects" and "parallel trend". The parallel trend is tested by ...
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1answer
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Should we test for an anticipation effect in difference-in-differences when a natural event occurs?

Normally, we test for anticipation effects as an assumption when using difference-in-differences. However, it seems that it is necessary for examining the impact of laws on firms' behaviour. For ...
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STATA date conversion for calculation

I have two data sets, where in data set 2 the date is in following form "Friday, 10th January 2019". In data set 1 the date is given in the form "10 Aug 2019". I want to append ...
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3answers
64 views

When do the sign and magnitude of coefficient of variable of interest matter if it is insignificant?

I am wondering when the sign and magnitude of coefficients of a variable of interest matter if it is statistically insignificant. Normally, I am concerning a coefficient of variable if it is ...
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2answers
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intuitively explain the equation of $Var(b_1)$ in OLS model

Above is the capture from the Econometrics slide from "Hill,Griths and Lim (2018) Principles of Econometrics". I have no problem the see the blue font sentence separately, it's all about the ...
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GMM Estimation with HAC Weight Matrix in R

I am currently working on my econometrics assignment regarding a seminal paper of John Taylor (1993) and really got stuck during the last days with one specific question. I am supposed to set up a GMM ...
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What is the compositional effect in panel data?

The definition of compositional effect is The term “compositional effects” is used here to refer to a range of observations about how using group averages can paint a misleading picture about how ...
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31 views

Using FWL theorem to calculate OLS coefficients (equations) [closed]

I have a model of the following form $Y_i = X_{i1}B_ 1 + X_{i2}B_ 2 + X_{i3}B_ 3 + e_i$ and using Frish-Waugh-Lovell Theorem I need to figure out a way to estimate each of the three beta coefficients. ...
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2answers
87 views

What happens if you regress the residuals on the regressor itself? [closed]

Suppose e hat is the OLS residual of a regression of Y on X. If not we regress e hat on X, what would the OLS coefficient be?
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2answers
40 views

Clustering of standard errors in Fixed Effects models

Why is there still a block structure in the covariance-variance matrix, and consequently a need for clustering of standard errors in fixed-effects models? Shouldn't demeaning solve the serial ...
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1answer
65 views

Does money hidden in "Moneyland" (offshore etc) get included in money supply and savings ratio statistics?

The recent Pandora Papers fuss has prompted me to ask a question that has been on my mind for a while. Does money hidden in offshore trusts, nominee companies and the various other Moneyland ...
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0answers
35 views

How clustering deals with autocorrelation?

In Diff-in-Diff estimator, I did not see people using lag of outcome variable as an explanatory variable to deal with auto-correlation problem, even in some paper where the outcome variable is ...
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0answers
24 views

Have we ever used the word "outcome" for regressors?

From my understanding, we normally use the word "outcome" for dependent variables( aka regressand), but today, when I look at this document it seems to me that they use "outcome" ...
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1answer
35 views

What is the universal benchmark for excluding a variable based on correlation?

Normally in a research, we exclude one of two variables that they are correlated. I am wondering what is the universal benchmark (better if having reference) to exclude one of them. Conventional ...
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1answer
49 views

IV regression: first stage in logs, second stage in levels?

I have a regression in levels, derived from theory. I want to instrument one of the variables, but the best instrument I find has a weak correlation to the endogenous variable in levels, and a strong ...
3
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1answer
33 views

How to get the bias-adjusted variance estimates for high-dimensional fixed effects in a linear model?

I want to do a linear regression: $y_{i}=\psi_{j(i)}+X_{i}^{\prime} \xi+\varepsilon_{i}$, where $\psi_{j(i)}$ is a high dimensional fixed effect on group $j$, $X_i$ are the covariables of each ...
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9 views

When should we use the distributed lag model?

When regressing the current and lag of a regressor on a regressand, we call it is distributed lag variable. I know it should base on the literature much to know when we should use this model. But ...
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What is the name of using lag explanatory variable in regressing on dependent variable?

In general, we can run lag of response variable or lag of explanatory variable on regressand. The former (running lag of response variable on response variable is called auto-correlation), can I ask ...
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1answer
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Is it a need to test auto-correlation in Difference-in-Difference?

Sometimes we should put the lag of response variable to a model due to auto-correlation (how to check auto-correlation can be seen here in Stata (comment #11) by using Durbin Watson test). However, ...

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