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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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Gapminder and OurWorldInData

I have found two great resources to learn about the distribution of goods (of any kind) all over the world: gapminder (Hans Rosling) ourworldindata (Max Roser) By reading their "about" sections they ...
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ratio independent time-invariant variable

I run the following function: $$Y_{it} = a_0+a_1*X_{it}+K*a_3+\epsilon_{it}$$ where $X_{it}=M_{it}/N_{it}$ is a generated variable. I got data $Y_{it}$ for the period from 2010 to 2015. Due to data ...
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Using Propensity Score Matching to evaluate non randomized and fully implemented village fund program

So i want to make a research about the impact of this program to community empowerment and infrastructure in villages. But the problem is the program itself (at the first year) implemented to almost ...
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Dividing households by income

I wonder how one should (or does) divide households by income in a sensible way. Say you want to divide households in a country into five income groups: very small income small income medium income ...
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Market baskets: cross-border comparisons

The concept of a market or consumer basket is quite intuitive. I assume a market basket for a given country tells for which goods an average person spends how much of her money. To be able to compare ...
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What is the appeal of DSGE models?

As far as I understand people like them, because they fit the data quite well when compared to VAR's for example while also having an economic interpretation. They appear to explain observations in a ...
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Stationarity of log industrial index and log CPI

I'm looking to estimate a VAR, one of the variables in this VAR is the log of industrial production, and another is the log of the consumer price index. Will I need to difference these to get ...
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Gapminder's Dollar Street and the role of self-supply

I find it quite hard to get a clear picture of what the income numbers in Gapminder's Dollar Street tell. How to compare \$27 in Burundi with \$10,098 in China? What would it mean that the family in ...
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Econometrics: Is it feasible to use the “effect of the treatment” estimations from a diff-in-diff as dependent variable?

Basically I have many treated units and I would like to estimate (by applying the Diff-in-Diff methodology) the effect of the treatment. In my particular case it's very likely to observe certain ...
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Does it matter if there's simultaneous determination between two dependent variables?

For example, if I have an equation $$ y = \beta_0 + \beta_1 x_1 + \beta_2 x_2 + u $$ Where $x_1$ and $x_2$ are simultaneously determined, say $$ x_1 = \gamma_0 + \gamma_1 x_2 + \gamma_2 z_1 + e $$ $...
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Physical goods in a typical household

Estimating how much of physical goods a somehow typical person or household owns today (say in the Western world, compared to former times) is not so easy I guess, but there is one single number that ...
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Feature Scaling before applying Cubic Splines?

Should I standardize my features before applying Splines? More specifically, I am running the following code to transform my features: ...
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If all of LATE (Local Average Treatment Effect) assumptions is satisfied?

I would like to know intuitive and specific interpretation of LATE. If all the assumptions for LATE is satisfied, we can say that the Instrument Variable (IV) has an effect to estimate X on Y. Also, ...
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Using Gretl for ARCH model

How to forecast of volatility with use ARCH model in gretl? Because if I use function "gig" I get non positive coefficients for ARCH(2), ARCH(3),...
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Should coefficient on interaction term be positive or negative?

I have the following model for housing prices price = $\beta_0$ + $\beta_1$ sqrft + $\beta_2$ bedrooms + $\beta_3$ sqrft $\times$ bedrooms + $\beta_4$ bathroom, where sqrft is square feet. I am ...
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Spurious regressions [closed]

If $\{ X_t \}$ is a $I(1)$ series and $\{ Y_t \}$ is a $I(0)$ series, would it cause "spurious regression" when regressing like $Y_i=\beta_0+\beta_1 X_i+u_i$? Thanks!
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Possible regression biases with GDP [x] vs Health expenditure [y] (both per capita)

I am regressing per capita health expenditure on per capita GDP. I have 3 data columns (health expenditure, gdp, population) So my regression function is healthexpenditure/population = b0 + b1.(gdp/...
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Generating Variable frequency

I three variables, zipcode, date (month_year) and name of an installer. I need to generate: 1- a new var that is equal to the number of repetitions the installer name is repeated in month_year and in ...
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How does one do a hypothesis test for elasticity?

Given the regression output $$\widehat{\ln cons} = \underset{(0.6018)}{0.4054} + \underset{(0.0744)}{1.2739}\, \ln m - \underset{(0.1902)}{0.6666}\, \ln p_1 -\underset{(0.2645)}{1.6146}\, \ln p_2$$ ...
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Mankiw, Romer & Weil: Estimating Implied Alpha & Beta

I am replicating Mankiw, Romer & Weil (1992) with data from 1995 through 2015, and I wondering how they estimated the implied alpha and beta. Thank you, For those curious, the paper can be found....
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Difference-in-differences Matching

I have a difference-in-differences analysis. My treatment is at the county level. Each county received the treatment at a certain point in time. I want to proceed with a propensity score matching as ...
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GARCH(10,10) model

I try to find an easy and understandable description of How to calculate a short-term variance in garch model, when p and q are not equal 1. Let's have a look at this video: https://www.youtube.com/...
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Do all parameters have to have the same nature in a structural change test?

Lets say I am building a market model to estimate the beta of a stock with respect to a index of stocks. The beta maybe Constant / Autoregressive of order 1 / doing a random walk. I realize there are ...
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VAR model OLS line by line

I am estimating a VAR model line by line. Lets say the conditional variances are correlated. We would expect size distortion. So we would use another method, perhaps a HAC standard error to account ...
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Interpreting coefficients with Delta ln as independant and dependent variables

Imagine we have a DGP such that $$ \Delta \ln y_{it}=\beta\times\Delta\ln x_{it} $$ How do you interpret the $\beta$ coefficient, since it is expressed in an approximation of a growth rate? Thanks ...
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instrumental variables

I have a question related to IV methods. Suppose I have a regression $Y = a + b_1 X_1 + b_2 X_2 + \epsilon$, where $Y$ is a dependent variable and $X_1$ is an endogenous independent variable and $...
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Is inconclusive region in durbin watson a problem?

What to do if my durbin watson is found to be inconclusive? Do I have to change my model?
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Transformation of cutpoints in Ordinal Probit/Logit regression

The likelihood for an ordinal probit/logit regression model is given as - $f(y|\beta ,\gamma ,z ) = \prod_{1}^{n} \left [ \Phi (\gamma _{j} - x_{i}'\beta ) - \Phi (\gamma _{j-1} - x_{i}'\beta ) \...
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Should the control variables in an econometric regression be correlated with both the dependent and the primary independent variables?

If, for instance, my dependent variable is some happiness index, and my independent variable is a dummy for whether they experienced some randomly occurred natural disaster. I am trying to analyze the ...
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How do we calculate Beta in a OLS regression of the mean of y on the mean of lag of y?

In a simple OLS regression we calculate the estimator Beta by dividing the covariance of x and y by the variance of x. How do we calculate the estimator Beta if we regress the mean of a variable (at ...
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Can I draw a smaller sample from one treatment group?

in an RCT, I have 3 different treatment groups and one control group. The size of the control group is around 1000 while the size of other groups are just above 300. To test balance I used ANOVA and ...
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If two variables are not cointegrated, can one still cause the other?

For part of a project, I wanted to see if electricity consumption causes GDP in Colorado. I initially intended to follow the approach of Mozumder and Marathe (2007), who use a VECM approach, but that ...
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What R-squared is a low R-squared?

I keep hearing that R-squared does not really matter in economics research and that due to the unpredictable human nature, economics research regressions tend to have low R-squared. But how much is ...
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covariance of autocorrelated time series

When we calculate the variance of a time series with autocorrelation, we need to do some shrinkage to get the correct value. What about say we have two time series, X, Y. both have autocorrelations. ...
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Sum of residuals in multiple regression equals 0

I understand that in multiple regression $$\sum_{}^{} X_{i,j}\hat{u}_{i} = 0 $$ but I do not understand how my textbook says that if we include the intercept in the regression ($X_{i,0} = 1$)then we ...
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Convergence in probability and convergence in distribution

Im a little confused about the difference of these two concepts, especially the convergence of probability. I understand that $X_{n} \overset{p}{\to} Z $ if $Pr(|X_{n} - Z|>\epsilon)=0$ for any ...
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Independently and Identically distributed random variables

What does it mean for two random variables to be "identically distributed"? Does it mean that they come from the same probability distribution?
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Existing metric for personal productivity hours needed per life hour?

With about 50 hours of productivity a week, including work, cooking, etc. I can complete the tasks and pay the expenses necessary to live about a week. Subtract maybe 5 hours of labor that goes into ...
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Combining Difference-in-Differences with Matching Methods When Parallel Trends Are Met in Unmatched Data

I'm running a difference-in-differences (DID) regression on panel data as follows: $$ Y_{it} = \beta_{0} + \beta_{1}Treat_{i}\times Post_{t} + \mathbf{\Pi}\mathbf{X}_{it} + \tau_{i} + \gamma_{t} +\...
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Disaggregated price index

im trying to make my own consumer price index using the laspeyres index methology. However im having problems finding the individual prices. However i have the disaggregated cpi components. For ...
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Multiple regulatory changes at the cutoff

Consider a running variable $a$, and a cutoff $a_0$. There are two regulatory variables, $x$ and $z$. Both variables jump around $a_0$, in the sense of fuzzy regression discontinuity design (RDD) ...
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How does one deflate weekly price data?

It seems the highest-frequency consumer price index (CPI) data available is monthly. How does one convert weekly or daily price data into real prices?
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How to do test statistic on difference in two independent variables?

If i have time series regression $R_{i,t} = \alpha + \beta x_1 + \gamma x_2 + \delta x_3 + \varepsilon_i$ In this case, how can I conduct test statistic of $\beta - \gamma$? Is it to use unpaired two ...
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1answer
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Simple Econometric question

From LLN, we have $\text{plim} Y_n=\mu$. Now you have $W_n=Y^3_n$, what is the probability limit of $W_n$? Please help me answer this and thank you!
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how to find the elasticity of log(y) =β0+β1log(x) [closed]

I'm struggling with this question. Please help out with the correct formula. how to find the elasticity of log(y) =β0+β1log(x).
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How to control for population in Difference-in-Difference?

Random example, but let's say I'm examining the effect of a health program on influenza cases in India. They just randomly start the program in 7 of the 29 states. I have data on the number of flu ...
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1answer
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Endogeneity problem with a dummy variable

I have a panel data model as following, $$Y_{it}=intercept +B_1X_{it}+B_2Q_{it}+error_{it}$$ where $i$ is for firm and $t$= time. $Y$= trade credit demand, $X$= inventory cycle, as inventory ...
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What are general equilibrium effects?

Im reading alot on public finance and have been seeing alot of mention of measuring "general equilibrium effects". I know what general equilibrium is, but i dont know what general equilibrium ...
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1answer
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Imbens and Angrist (1994): the $D_i(z)$ variables

I'm referring to the Econometrica (1994) paper by Imbens and Angrist. In particular, I don't really understand the random variables $D_i(z)$ (defined on page 468). Could you please provide me with ...
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1answer
59 views

features of Generalised Method of Moments estimation

[ What does it mean that GMM is robust to distributional assumptions?