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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What should we conclude when the Adjusted R square decrease when adding a dummy variable into the regression?

In my regression using OLS using Difference-in-Differences regression, when I add a dummy variable into my regression, the Adjusted R-squared reduce from 0.6117 to 0.6111. Is it a critical result and ...
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25 views

How to explain the meaning of the coefficient of interest of Difference-in-Differences?

Considering a Difference-in-Differences (DiD) equation with a dummy variable: $$ y_i = \alpha + \beta D_i + Xit + \varepsilon_i. $$ While $$Xit$$ is a set of covariates. Let's say the DiD here has the ...
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Weighted OLS with weights as a regressor

Suppose one estimates: $$y_i =\beta_0 +\beta_1 x_i +\varepsilon_i$$ with weighted least squares using $w_i$ as weights. If one were instead to estimate $$y_i =\beta_0 +\beta_1 x_i +\beta_2 w_i +\...
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Is there any case that the coefficient of variable of interest in DiD more significant when adding more variables?

Considering a Difference-in-Differences equation with a dummy variable: $$ y_i = \alpha + \beta D_i + Xit + \varepsilon_i. $$ While $$Xit$$ is a set of covariates. Today when I add more covariates, ...
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1answer
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Whether coefficient of a dummy variable can receive the value higher than 1 and using log for per-million variable?

Today when I run a regression (in specific Difference-in-Differences but I think it does not matter here). My outcome variable is a ratio (lower than 1 million, it is about a number of people per ...
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how to calculate whether a series is convergent or divergent? [migrated]

If a series is given for example 1 - 1/2 + 1/4-1/8+1/16-1/32+.... up-to infinity how to check whether the series converges or diverges? is there any particular formula?
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What percentage of utils do the top 1% pay in tax

A commonly cited statistic in American politics is the top 1% of Americans earn 20% of all income, but may 40% of all income taxes. This is measured in dollars, however, and a dollar is worth more to ...
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21 views

Filling gap in data with correlated series

I have two time series, of different length. A time series is GDP growth. The gdp growth is the series I need, and it is also the longer series, but it has two gaps in two periods one after the other. ...
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164 views

What is the difference between finite and infinite samples?

Today I faced a term "finite samples" in reading Borusyak (2021)'s work: We conclude the section by providing simulation evidence that the efficiency gains from using our estimator are ...
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1answer
22 views

Asking for the definition of various types of treatment?

Borusyak (2021) writes the following: We further discuss the implications of our results when treatment is simultaneous rather than staggered, when it can switch on and off, and when multiple ...
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What does "unrestricted treatment effect heterogeneity" mean?

Borusyak, 2021 has a sentence We show that this estimator takes a particularly transparent form under unrestricted treatment effect heterogeneity, while our construction also yields efficiency when ...
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What is "panel-type specifications" more general than "two-way fixed effects"?

Borusyak, 2021 has a sentence While our baseline setting is for panel data with two-way fixed effects, we show how our formal results extend naturally in a number of ways. We allow for more general ...
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Why homogeneous treatment assumption leads to "spurious identification of long-run treatment" in staggered DiD?

Borusyak, 2021 has a sentence Third, in dynamic specifications, implicit assumptions about treatment effect homogeneity lead to the spurious identification of long-run treatment effects for which no ...
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1answer
185 views

What do "underidentification" and "point-identified" mean in econometrics?

Borusyak, 2021 has a sentence First, we note that failing to rule out anticipation effects in “fully-dynamic” specifications (with all leads and lags of treatment included) leads to an ...
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38 views

Estimate a Monetary Policy Reaction Function with Generalized Method of Moments

I want to estimate a Monetaryu Policy Reaction function with GMM. I have well understood how to estimate a distribution (e.g. the normal distribution, the log-normal distribution, and so on) with GMM. ...
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No claim whether data is stationary or non-stationary, but OLS is still applied?

I am reading this famous paper 'Taylor’s Rule and the Fed: 1970–1997', and there is no check for stationarity, non-stationarity, integration or cointegration of the data, but the author just use OLS. ...
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2answers
30 views

What are the benchmarks for parallel trend test in Difference-in-Differences?

For parallel trend assumption in Difference-in-Differences (DiD), normally which benchmark we normally use to judge whether the parallel assumption is being satisfied? From this answer from @1muflon1, ...
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1answer
32 views

Is there any reason to test Difference-in-Differences if paralell trend is weakly violated?

Normally when testing the parallel trend assumption in the Difference-in-Differences setting, we normally conduct the joint null test for the coefficients of pre-treatment periods. Normally, while the ...
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How to test parameter restriction in seemingly unrelated regression using STATA?

Given constrain 1: [w1]ln_p2 = [w2]ln_p1 I estimate an Ideal Demand System using surge command in STATA w1 = a1 + g11 (ln_p1) + g12 (ln_p2) + b1(real_income) w2 = a2 + g21 (ln_p1) + g22 (ln_p2) + b2(...
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1answer
37 views

When should we exclude an independent variable out of the regression?

In my case, I have two questions that I want to ask here relating to correlations among variables: Whether it makes sense if we test the impact of laws on two outcome variables that are correlated to ...
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1answer
16 views

Why the significance level of variables of interest decrease in subsampling?

When I did my research with DiD, I saw that when I split the sample to subsample, while the coefficient in the whole sample is significant but this is no longer in the subsample. Can I ask what is the ...
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1answer
25 views

How can we explain when adding a variable to a regression, the coefficient and significant levels of variable of interest decrease?

I am working on DiD setting, the variable of interest is $Y_{i,t} = \alpha_i + \beta_t + \gamma D_{i,t}$ while $i$ and $t$ are unit and time fixed effects. $\gamma$ is the coefficient of variables of ...
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How to define the treatment effect of triple diff (DDD)

I am examining the triple diff (diff-in-diff-in-diff)(DDD) in a staggered setting. Normally, when it comes to DDD, I understood that we examine the differential movement between two sub groups based ...
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How many leads we use for parallel trends testing in daily data (difference-in-differences)?

In a difference-in-differences setting, if we deal with yearly data, we normally test the parallel trends assumption for 3 or 4 years before the event dates. However, when dealing with daily data, how ...
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2answers
64 views

Kronecker Product in Econometrics

I wondered if someone could explain the motivation for using a Kronecker product in econometrics. I understand that if we had two matrices, A + B, then the Kronecker would take each element from A and ...
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1answer
38 views

Are there any papers which used the event study methodology NOT in a financial market context?

I was advised to implement an event study in the context of air pollution levels after an event had happened. Now my problem is, that I can not really find any introductory literature (or papers), ...
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1answer
26 views

What is being meant by "cohort-specific fixed effect for each state of birth" in Card&Krueger(1992)? What does the following equation mean?

I am referring to this paper on school quality and returns to schooling. The econometric specification has been described by eqn (1) on page 4. The authors have taken "cohort specific fixed ...
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1answer
64 views

"Efficiency" of a kernel

My understanding is that the Epanechnikov kernel is "efficient" in a mean squared error sense. Footnote 4 of Wikipedia's page defines the "efficiency" of a kernel as $$\sqrt{\int u^...
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1answer
40 views

C-statistic when one estimation is just identified

My question is motivated by Do, Joshi, and Stopler's paper "Can Environmental Policy Reduce Infant Mortality? Evidence from the Ganga Pollution Cases". A simplified form of their models that ...
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1answer
29 views

Interpreting ACF Plot if all its variables exceed confindence interval

I have plotted an ACF plot and found all its lagged variables exceed the confidence interval range. I have tested again with Ljung box test on its residuals and most of the lagged variables have a ...
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1answer
41 views

Is there an empirical model for studying contemporaneous feedback relationships?

In a DSGE model, monetary policy shock (Taylor rule style) increases interest rate. So output and inflation falls, which feedback contemporaneously to the interest rate. Thus, interest rate ($i_t$) ...
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1answer
658 views

How can I prove this?

I was reading a book on econometrics and I found this algebraic transformation and I don't know how I can get there.I would appreciate some help. $\sum_{i=1}^n (X_i-\bar{X})\cdot (Y_i-\bar{Y})=\sum_{i=...
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1answer
29 views

Synthetic Control Asymptotics

I'm aware of the basics of the synthetic control method, and that permutation tests are commonly used for inference. Are there papers that develop asymptotic theory? i.e. if the regression approach to ...
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1answer
45 views

Speculating about causal effects

Let's say I have some mechanism that theoretically says $a_t$ positively affects $b_t$ and $b_t$ positively affects $c_t$. I have data on $a_t$ and $c_t$ but not $b_t$. Thus, $b_t$ is unobserved. I ...
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1answer
24 views

Need Clarification of Terms: Innovation v.s. Disturbance

I have been reading some econometrics paper and came across terms "innovation" and "disturbance" of regression models. Can someone please explain to me what they are? I have ...
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0answers
15 views

Modeling GARCH in R with other factors

I am new to GARCH model. I want to build a GARCH-in-mean model with the following forms $$ r_t = \mu + \lambda \cdot h_t + \sum_{i=1}^n \alpha_i \cdot X_{i}(t) + \epsilon_t$$ where $\epsilon_t$ ...
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38 views

Kleibergen Paap F-statistic

I have commonly seen references to a Kleibergen and Paap F-statistic. In their paper, I see a derivation of a chi-squared statistic, but don't see any references to the F-distribution or F-stat. In ...
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1answer
50 views

What are the hypothesis and results explaination of joint null test?

When trying to satisfying the paralell assumption in Difference-in-Differences setting, I have the equation: $$ y_{kt} = \alpha_k + \lambda_t + + \delta_{-4} d_{k,t-4} + \delta_{-3} d_{k,t-3} + \...
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1answer
34 views

What is the difference between controlling for exchange rate change and inflation?

In a paper, I saw Dasgupta, 2019 control for the exchange rate change. Normally, I control for inflation. From my view, these two variables seem to play the same role, leading to a multicollinearity ...
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Why we need to control for import and exchange rate change when examining asset growth?

Dasgupta , 2019 examines the impact of antitrust laws on asset growth, total net external financing, debt-to-equity ratio. In his regression, I saw that he controls for imports as a percentage of GDP, ...
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Event study on market revenue

I am interested in performing an event study. Can it be modified to assess the impact of an event/s on a market's revenue as opposed to the value of a firm? Thanks
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1answer
41 views

What does data at individual and aggregate mean? [closed]

When registering an datasource account, I saw the response as below "Will your research present data individually or in aggregate? I am wondering what does "data individually or in aggregate&...
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2answers
81 views

Questions regarding DSGE model

Christiano,2017, abstract stated that Macroeconomic policy questions involve trade-offs between competing forces in the economy. The problem is how to assess the strength of those forces for the ...
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1answer
29 views

$I(g)$-terminology

During my studies I came across the $I(g)$-symbol, in the sense that $Z_t \sim I(g)$ for an integer $g$ and $Z_t$ is a times series. What exactly does this mean, and does it have to do with ...
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1answer
34 views

How to estimate a system of equations with missing values in dependent variable with sureg?

I am trying to estimate vote shares of different parties. So, suppose I have 4 parties, each having its own column in the data set. Hence, the sum would be tending to 1. Now, if a party does not ...
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1answer
45 views

Incidental Parameters and Poisson Regression

Consider: $\ln(E[Y|X])=X_{it}'\beta+\alpha_i$ and thus $E[Y|X]=e^{X_{it}'\beta+\alpha_i}$. We can write this regression model as: $$Y_{it} =e^{X_{it}'\beta+\alpha_i}\eta_{it} $$ For which the ...
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1answer
34 views

How to recognize correlation in spurious regression case

Assume we are given two independent random walks $$ Y_t = Y_{t-1} + \varepsilon_{1, t}, \quad \varepsilon_{1, t} \sim \mathcal{N}(0, 1) \\ X_t = X_{t-1} + \varepsilon_{2, t}, \quad \varepsilon_{2, t} \...
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1answer
28 views

Interpreting an ADF test in R

Although being a mathematician, I am fairly new to time series and R. On an assignment I was being asked to check a time series for stationarity in R, only using the $\texttt{adf.test}$ function that ...
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1answer
43 views

What is the "moderator for the relationship" in interactive regression model?

I have an interactive regresison model as below: $Y_{i,t} = \beta_0 + \beta_1$$D_i$ + $\beta_2$$P_{i,t}$ + $\beta_3$($D_i$$P_{i,t}$) + other covariates + error terms In this model, why $D_i$ is called ...
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1answer
52 views

When doing 2SLS, can you use OLS if the dependant variables are dummy variables?

I assumed you would need to do an IV probit in this scenario, but it was not used in this AER paper - Children and Their Parents' Labor Supply (Angrist and Evans, 1998). The first stage is estimated ...

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