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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1answer
206 views

How does one deal with trending variables in Linear Regression?

I have a linear regression model with two independent variables that takes the form: $$y_{it} = \beta_{0} + \beta_{1}x_{it} + \beta_{2}z_{it} + u_{it}$$ where $u_{it}$ is the error structure. I want ...
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30 views

What is the difference between Q4/Q4 and Y/Y GDP growth?

Per US media, the US economy grew 3.1% in 2018 Q4/Q4 and 2.9% in 2018 Y/Y. 2.9% seems the reference number in various databases (World Bank, Reuters, Bloomberg, etc) but what exactly does Q4/Q4 mean ...
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1answer
31 views

Real GDP per capita data

Can anyone share where i can find data related to the real GDP per capita of a country ? Is it available ? My second question is which variable should i use for economic growth i mean which one is ...
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22 views

Cointegration but no Granger causality

Suppose I have two variables - $y_t$ and $x_t$ - which are cointegrated. I believe that (i) $y_t$ responds to deviations from the long-run equilibrium, (ii) the long-run elasticity of $y_t$ with ...
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1answer
20 views

GDP(Expenditure view of GDP): /Why aren't investments categorized as non-final goods?

My understanding is that consumption = consumption of final goods = whatever consumers buy from companies (with an adjustment for export-import-process + maybe housing is slightly different (not ...
2
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1answer
33 views

What is the purpose of multiple regression?

For instance, consider the following regression equation $College Score=\beta_0+\beta_1HighSchool GPA+u$. We interpret this $\beta_1$as the effect of a higher High School GPA holding all other ...
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1answer
17 views

Annual Fraud Recovery Over Time: Should I adjust for inflation?

I have a dataset of the total amount the U.S. Department of Justice obtained annually in settlements/judgments of government fraud cases from fiscal years 1988-2019. There's a lot of variation, but ...
3
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1answer
35 views

Why don't researchers use regularized probit model?

I know that a regularized logistic regression can be done to reduce training error, but I haven't found any economics research that uses a regularized probit model, only a regular probit model from ...
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1answer
26 views

How are low/middle/high classes defined mathematicaly?

I am only looking for mathematical references. I think this belongs to econometrics but am not sure nor where to look at it specifically. I suspect the definition is given with some kind of weighted ...
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2answers
42 views

Can logarithm and polynomial transformation be included in the same equation

Is it allowed to include logarithm and polynomial tranformations in the same econometric model. For instance : $$Y = x_1 + \log(x_2) + x_3 + x_3^2$$ I didn't find any interdiction however it seems to ...
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Where to find a list of U.S. policy changes for causal studies?

I'm currently trying to figure how the topic of my paper, which is supposed to be related to policy evaluation (causal inference). I thought it would be great if I could first obtain a list of recent ...
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23 views

meaning of regression coefficients

I am having some trouble understanding exactly what is meant by the "true" Regression coefficients. Let's say it is stated that "the true regression coefficients are given as $y=a+bx+e$ where the ...
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1answer
27 views

Johansen test explanation

I am trying to understand the whole Johansen procedure via wikipedia and some other articles and I'm a noob in econometrics so there is a lot of notation and jargon that I think I am not familiar with....
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1answer
24 views

Logistic regression: Equation for marginal effect at the mean

I am estimating the following logistic regression (binomial family) by maximum likelihood: $$ \ln\left(\frac{Y}{1-Y}\right) = \beta_{0} + \beta_{1}D + \beta_{2}X + \epsilon$$ where D is a dummy. ...
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1answer
36 views

What defines a data generating process

Let’s say we have a certain DGP $y=c+ax+bz+ error$. I take this to mean that conditional on the values of $x$ and $z$ in a certain instance (and no additional information )the expected value of $y$ ...
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1answer
32 views

Omited Variable Bias and descriptive statements

Let's say $y=c+ax+by+error$ (where the error term fulfills all the assumptions) descibes reality. If we have $z=vx$ than $y=h+max+s$ will also describe reality. When reading about OVB I have seen ...
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1answer
30 views

Forecasting quarterly EUR/USD exchange rate

My aim is to forecast the one-quarter ahead EUR/USD exchange rate. I have constructed a regression model with the following as explanatory variables: exchange rate in the previous quarter, EUR/USD ...
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1answer
56 views

Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
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Measuring time discount in scheduled services: is there a literature in empirical economics?

Prices might be different, for the same service at some date, if you try to acquire the service two weeks in advance and again at a closer date (e.g. two days prior to the scheduled date), such as ...
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2answers
24 views

Can you take the moving average of quarterly data of an explanatory variable in a regression to smoothen noise and get more accurate coefficients?

I'm trying to use acceleration of quarterly data on household debt (the difference in the difference in debt) in a regression on unemployment (only concerned with correlation) but quarterly data is ...
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32 views

Simultaneous Equations Models in R

I use the systemfit package to evaluate Simultaneous Equations Models (for example 2SLS). But I do not understand how to predict endogenous variables using the new ...
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0answers
12 views

What's the difference between true simultaneity and apparent simultaneity?

The definitions I find were: True simultaneity: Decisions can be made simultaneously by agents. Apparent simultaneity: Aggregation of causal relationship over agents over time. But I don't ...
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1answer
26 views

Interpretation of dummy variable : Random Effects Model

I am running a RE regression and I have export similarity index between two countries as the dependent variable and have a dummy variable such as share a border(=1 if countries share border, 0 ...
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1answer
27 views

Detecting Multicolinearity

Are high R square and low t-stats a signal for multicollinearity? What is the nature of this problem and correction? Also, how do you generally decide if the problem is high enough to be corrected?
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12 views

Diff in diff on model generated data

I have a structural model calibrated to N different locations and am running a series of counterfactual experiments. When I present the results for each experiment for each of N locations in tables, ...
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1answer
25 views

Are CPI stats weighed based on population size

Generally inflation and CPI are reported on a national level. If a country for example has 10 cities, after surveying prices in each individual city, how is the total CPI number determined for the ...
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1answer
30 views

Dimensional analysis of GDP

The GDP is sometimes given by $$ GDP=P\cdot h\cdot e \cdot F $$ Where $P$ is the Productivity, $h$ is the number of hours worked, $e$ is the employment rate and $F$ is the size of the labor force. ...
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1answer
18 views

How do I run a regression with the restriction that one set of parameters are proportional to another?

I'm running a regression with a set of 3 dummy variables (for four categories of a variable) and these 3 dummies interacted with a continuous variable. I want to impose the restriction that the vector ...
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2answers
37 views

How to use an instrumental variable to estimate the parameter?

I have the following linear model of log wages (w) explained using years of schooling (S), years of experience and its square $(E,E^2)$ and 3 dummy variables indicating whether the individual was ...
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1answer
17 views

ragged edge concept

I'm confused by the concept of the ragged edge in real-time data analyses. I understand that data for $x_t$ comes in various forms: a first estimate, a series of additional estimates and, after some ...
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1answer
36 views

Linear Probability Model Instead of Logit in Fixed Effects Regression

In our panel data analysis we estimated a fixed effects linear probability model (LPM) instead of a fixed effects logit regression because our sample size was quite small (600 individuals) and the ...
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0answers
14 views

Does income equality correlate with less fraud?

If a population of people have less disparate income levels among themselves, are we able to predict anything about the level of phone scams, phishing emails, etc. perpetrated by members of that ...
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1answer
34 views

How to show that the estimator is consistent?

$Y_i=\beta_0+\beta_1X_i+U_i$ is my regression model for an I.I.D. sample with N=1000 observations. Suppose $U_i\sim I.I.D.(0,\sigma^2)$ and Xi are also I.I.D for i=1,2,3......1000. Xi is independent ...
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2answers
20 views

Difference between no perfect multicollinearity and no multicollinearity

Some textbooks (for example, Introductory Econometrics: A Modern Approach by Jeffrey Wooldridge) assume that no perfect multicollinearity for the OLS regression, while others (for example, ...
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1answer
50 views

How to test if the effect of one regressor entirely comes from other regressors?

I have a regression model that includes IQ test scores as the dependent variable; my own education, my father's education and my mother's education as independent variables. Suppose I want to know ...
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1answer
56 views

Derive the asymptotic distribution

Let $x_1, ..., x_n$ and $y_1, ..., y_n$ be two independent random samples from $X$ and $Y$. We have $µ_X = E (X ) > 0, µ_Y = E (Y ) > 0$ and $σ^2_X = Var (X )$ and $σ^2_Y = Var (Y )$. Derive ...
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2answers
32 views

Uniqueness of OLS estimates

Wooldrige says that ‘intuitively, to estimate k+1 parameters, we need at least k+1 observations’. Why is this the case?
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1answer
37 views

Does it matter which is the dependent variable in regression of time series data?

I am testing for cointegration between the Real GDP per capita of England and France. I use a Dickey-Fuller test to test for stationarity and concluded that both of my series are non-stationary. So I ...
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0answers
16 views

Regression design, difference in differences

I plan to look at the regional differences of a policy effect. I would like to use the difference in differences approach however I am not sure how to assign a control group. I have data for time ...
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0answers
40 views

How can I prove that the following estimator is biased?

I'm trying to prove that $e^{x\hat{\beta}}-1$ is a biased estimator for $e^{x \beta}-1$. I know that this involves taking the expected value of the estimator and showing that it is not equal to $e^{x ...
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0answers
18 views

Order of Marginal Effects in Ordered Regression Model

I'm looking to validate my understanding of marginal effects on the probability of an ordered probit model. I don't understand how ME is calculated in respect to some alternatives. For example if I ...
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2answers
41 views

Nash Equilibrium and SPNE [closed]

Firms Alpha and Beta serve the same market. They have constant average costs of $2 per unit. The firms can choose either a high price ($10) or a low price (5) for their output. When both firms set a ...
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1answer
34 views

Why are the same set of controls used for both OLS and 2SLS?

I have been reading several papers that use 2SLS. These papers usually also show the OLS regression results. I noticed that when authors report results for 2SLS, they also include control variables ...
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20 views

A question about independence of LATE framework (IV)

I came across the assumption of independence of the LATE in 2SLS: My first reaction is, why D1i and D0i are independent of the instrument Zi? Shouldn't the treatment and IV be correlated for the IV ...
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1answer
26 views

Negative correlation conditional variance and return

I've estimated a GARCH for S&P 500, Nikkei and DAX index. The model for the return of S&P 500, the results indicate the return of DAX has an negative effect on the S&P 500 conditional ...
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0answers
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Is there a specific test for this procedure? (NKPC and coefficient stability)

I'm running a GMM regression in order to estimate a New Keynesian Phillips Curve, with forecasting purpose, and i want to know if there is a testing procedure for the following problem: (i) First i ...
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0answers
14 views

Handling large percentage of zero-valued observations in the dependent variable in a panel dataset

I am writing a paper using a panel dataset in which my depepent variable has an large percentage amount of zero values observations. Those zero values are real zeros, I mean they are not missing data ...
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1answer
75 views

Econometrics: why the i.i.d assumption and weak exogeneity assumption imply strict exogeneity?

The proposition is from lecture notes of advanced econometrics of Yongmiao Hong: A1: $\{Y_t,X_t'\}_{t=1}^n$ is an i.i.d. random sample. A2: $E(\varepsilon_t|X_t)=0$ almost surely with $E(\...
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32 views

calculate magnitude of a recession

I'm doing an exercise from Blanchard Macroeconomics where I'm, apart from other things, asked to calculate the severity of recessions in the US since 1960. The data on the webpage that's referenced is ...
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1answer
41 views

How to change the observation for the first lag in an AR(1) model?

I run a simple AR(1) model in my analysis using ols: ar.ols(df$y, order.max = 1)) However, I work with generations as my unit of analysis. Therefore, the first ...