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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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Econometrics - help

Need help with Econometrics question using STATA or R. PLEASE SHOW THE COMMANDS THAT YOU USED AND THE OUTPUT. . The basic model you are interested in is the following extended Mincerian earnings ...
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1answer
56 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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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
34 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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13 views

Mixed data with fiscal and calendar year

I am performing time series analysis with yearly frequently. However I need to regress a data compiled by calendar year against another compiled by fiscal year. Is it possible to deal with this? If ...
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19 views

Estimating parameters for model of specialization derived from Hecksher-Ohlin model of trade

I'm doing a dissertation on patterns of specialization, empirically testing the H-O model. It's only Master's level, so I'm afraid it's a bit derivative and basic. The backbone is to estimate ...
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1answer
47 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
27 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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0answers
31 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
29 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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what can be used as a proxy for Stock of Human Capital in an Economy?

I am an undergraduate student of Economics, currently in my Second year. I am writing an article wherein I need to show that Quantity of Skilled Labour is an important determinant of FDI inflow. A ...
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2answers
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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
35 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
45 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
92 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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What is the difference between Moffitt's endogenous membership problem and the correlated unobservables problem?

In his paper Moffitt (2001) describes three kinds of problems occurring when estimating peer-effects: the endogenous membership problem, the correlated unobservable and the simultaneity problem. ...
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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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32 views

Help me solve this?

Suppose the market for railing is competitive. The demand function is given by Q=120-2P, FVF projecting is active in the market and faces a cost function C(Q)=200+2Q+0,5Q^2. a) What is the optimal ...
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1answer
63 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 ...
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2answers
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When is self-selection a problem? Mincer equation

I need help understanding this selection bias problem. I am estimating a mincer equation for a final year project and I was told I need to worry about self-selection bias IN OCCUPATIONS. My lecturer ...
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1answer
50 views

Lucas Critique and RE: Did one arrive before the other?

Hi All: I have no formal background in economics but I've been teaching myself RE for the last 3 or so years when I get the chance. I know the history and parts of the literature pretty well but it's ...
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How are rotation matrices used in structural VAR identification through sign restrictions?

I saw this identification method is used in several working papers but to me it is impossible to understand how it works by simply reading them. I have searched many books and lecture notes in order ...
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We want to look at the relationship between tax burden and shadow economy size in our panel data--are we making a big mistake?

I am working on my Bachelor's seminar paper with a partner. We initially were interested in looking at bitcoin volume by country (unobtainable data but we didn't know that until we read up on the ...
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1answer
25 views

Two Endogenous Variables and Two Instruments

I have a model $Z = \alpha X + \beta Y + \gamma C + \epsilon$. I am interested in the relative effects of $X$ and $Y$ on $Z$. However, $X$ and $Y$ are endogenous. I have identified two instruments $X'$...
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Group-level random effect correlated with within-group independent variable

Dear StackExchange community, Question: According to, e.g., Wikipedia, random effects models assume "that the individual specific effects are uncorrelated with the independent variables." I ...
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1answer
44 views

prove that $M_xM_1 = ?$

Let $\mathbf{y} = \mathbf{X_1}\mathbf{\beta_1}+\mathbf{X_2}\mathbf{\beta_2}+\mathbf{u}$. Let $\mathbf{X} = [\mathbf{X_1} |\mathbf{X_2}]$. Define $\mathbf{M_i}$ to be the complementary projections ...
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29 views

Modelling Y using “net” variables

It happened a lot of times that I would have liked to model Y using some "net" variable (net flows for instance) that may be some periods above and some periods below zero. I found it hard to use them ...
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1answer
24 views

Sum of residuals and Matrix calculus (step by step)

Write the sum of residuals in matrix form. Attempt: $(y-X\boldsymbol{\beta})^T(y-X\boldsymbol{\beta}) = y^Ty-\boldsymbol{\beta}^TX^Ty-y^TX\boldsymbol{\beta}+\boldsymbol{\beta}^TX^TX\boldsymbol{\...
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204 views

Is Gaussian distribution the proper choice for step in financial time series? E.g. DJIA ROI suggests Laplace instead

Data compression uses Laplace distribution ($\rho=\exp(-|x-\mu|/b)/2b$) for probability distribution of differences, while I see it seems economy uses Gaussian distribution everywhere (?), e.g. in ...
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1answer
36 views

Why does instrument exogeneity imply conditional mean zero?

In the following slide ECON4150 - Introductory Econometrics Lecture 16: Instrumental variables, Monique de Haan it says that "instrument exogeneity implies $E[u_i \mid Z_i]=0$" where instrument ...
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1answer
39 views

Dummy variable regressor OLS coefficient formula

Consider the standard linear regression model: $y_i = \alpha + \beta D_i + e_i$ where the coefficients are defined by linear projections and $D_i$ is a dummy variable. In the population, the ...
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What are some good metrics for intellectual progress (of all sorts)?

My thinking about this topic is vague, and I'm looking to clarify it. I'm not sure what "intellectual progress" is or if that's even a useful abstraction, but it seems like it should include things ...
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Beginner's book for Program Monitoring and Evaluation

I am looking for a basic book for 'Program Monitoring and Evaluation'. I searched the internet and could find the UNDP reports. But they are too comprehensive. Can anyone point me to some basic books ...
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2answers
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When is an OLS parameter unchanged on a subsample?

There is a sample of $n$ observations, each element has a numeric $Y$ and $X$ characteristic. There is an OLS regression over the sample $$ Y = b_0 + b_1 X + \textbf{u}, $$ $\textbf{u}$ being the ...
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1answer
57 views

Technical Analysts and Econometricians: A Question on Methods

I've been reading the book Technical Analysis Explained by Martin J. Pring as a result of a conversation with one of my friends who said he did technical analysis but didn't apply the types of models ...
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25 views

Nickell Bias in Unbalanced Dynamic Panel Models with binary Dependent Variable

I seem to be unable to tell the forest from the trees in the available literature. Imagine I want to test the impact of an exogenous shock in a dynamic panel setting to a get an impulse response ...
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1answer
42 views

Using an elasticity to evaluate changes in a dependent variable

Often in textbooks and online I see thte definition of an elasticity to be as follows: 1) $\epsilon = \frac{\frac{\Delta Y}{Y}}{\frac{\Delta X}{X}}= \frac{\partial \log Y}{\partial \log X}$ Thus, ...
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How would the innovation curve and market design change because of AI generated/ assisted IP

How would the IP market change if AI generated/ assisted IP (Patents) are allowed. As of now, Copyrights do not permit non-human authorship and Patent law is silent about such cases. I want to ...
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1answer
41 views

extremum Estimator (possibly tobit?)

This question is related to extremum estimators. I am looking to propose an estimator that I think may be a Tobit estimator, but I am unsure. The question is as follows: Let $z$ be a random variable ...
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1answer
73 views

Fixed Effects Variation

Suppose I wish to run the following gravity regression: $$ Y_{ijt}=\boldsymbol{X_{ijt}'\beta+}ij+i_{t}+j_{t}+\epsilon_{ijt} $$ where the LHS is bilateral trade between $i$ and $j$ in year $t,$ the ...
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1answer
31 views

2SLS with endogenous interaction terms

Suppose I have a regression model: $$y_{i}=x_{1i}\beta_{1}+x_{1i}D_{i}\beta_{2}+\epsilon $$ where $\mathbb{E}\left[\epsilon_{i}|x_{i}\right]\neq0$ , and there is a problem of endogeneity. In the ...
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30 views

Hp filter question

I know that again you never give any small explanation, but I want to hope you will give any information about that why HP filter is preferable to linear filter for business cycle studies? I only ...
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Would it be appropriate to include state level variable with MSA model?

Greetings I am running a time series which will use vector error correction model. My dependent variable is economic base which is comprised of manufacturing, mining and construction sectors. I have a ...
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0answers
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Estimation of causal effects in heterogeneous impact interventions

To me, this plot represents several individuals undergoing an heterogeneous-impact intervention from time t0 to t1. Individuals enter the intervention with certain levels of a trait (theta). The ...
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30 views

Regression where IV is a Quadrant

I am running a regression where I regress a dependent variable $V_i$ on two other variables $X_i$ and $Y_i$. Based on these, I create an auxilliary independent variable $Q_i$, where $Q_i$ is a 4-level ...
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Interpretation of Causality in Threshold Models

In threshold models: $y=x^{\prime}\beta^1 (1-g(z,\gamma, \delta)) + x^{\prime}\beta^2 g(z,\gamma, \delta)$ $g$ = logistic function, $z$=threshold variable, $\delta$ = location parameter, $\gamma$ = ...