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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4
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1answer
81 views

Multiplicative factorization of stochastic growth time series--solving for an eigenfunction/eigenvector

I'm trying to understand the tools used/presented in Lars Hansen's Econometrica paper "Dynamic Valuation Decomposition within Stochastic Economies." In a part in the paper, Hansen introduces a long-...
39
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1answer
23k views

What is structural estimation compared to reduced form estimation?

I've heard a lot of definitions given for structural estimation. But it's never seemed entirely clear to me. Some times I've heard that what one person might call "reduced form" estimation should ...
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2answers
540 views

Books to self-study applied econometrics

I'm a student and I'm interested in focusing on the application of econometric theory to "practical" situations. It would be great if you can suggest freely available books along with those that are ...
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0answers
61 views

Example of the change of measure proposed in Hansen (2012)

In this question, I'm continuing to explore the tools used/presented in Lars Hansen's Econometrica paper "Dynamic Valuation Decomposition within Stochastic Economies" (2012). I'm trying to compute an ...
0
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0answers
30 views

Error Correction Model with more than one independent variables

I was wondering if it is possible to set up an Error Correction Model with two independent variables (one dep var, and two indep vars)? If yes, what are assumptions/conditions to be met? In the ...
8
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1answer
308 views

Alternative way of deriving OLS coefficients

In another question of mine, an answerer used the following derivation of OLS coefficient: We have a model: $$ Y = X_1 \beta + X_2 \beta_2 + Z \gamma + \varepsilon, $$ where $Z$ is unobserved. Then ...
13
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5answers
3k views

Econometrics: Is elasticity meaningful in my, or any, regression?

A few months ago I interned at this organization; and, as a going away present, I decided to spend my last week, with whatever off time I had, to investigate the factors that affect teacher salaries. ...
11
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3answers
792 views

Understanding the construction of stochastic processes

I've seen stochastic processes modeled/constructed in the following way. Consider the probability space $(\Omega, \mathcal F, Pr)$ and let $\mathbb S$ be the (measurable) transformation $\...
8
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3answers
700 views

Book Recommendation for Microeconometrics of Discrete Data

I am looking for a few good books pitched at different levels to help analyse discrete data. Specifically: Specification, Estimation and the application of econometric methods to model discrete ...
2
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1answer
112 views

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 ...
2
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2answers
211 views

What is the relation beween Granger causality and Rubin's causality?

Granger proposed a test for causality based on time series, is there any relation with the notion of causality by Rubin that seems prevalent on applied micro work. The latter deals with the notion of ...
13
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5answers
10k views

What happens if the “control variables” are also endogenous?

I work in Political Economy, and a lot of the models include "innocent" control variables such as population, inequality, colonial legacy, etc. so that the author can claim unbiasedness on their ...
6
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2answers
960 views

CES production function estimation

Introduction There are different ways of estimating the parameters of a production function. For example, single-equation and system equation techniques are both possible. Another difference among ...
6
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2answers
625 views

Deriving the translog production function

Ive been having difficulty deriving the translog production function defined as: $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know ...
5
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2answers
288 views

What is an econometrician?

According to Wikipedia, Econometrics is the application of mathematics, statistical methods, and computer science to economic data and is described as the branch of economics that aims to give ...
4
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1answer
238 views

Efficient Market Hypothesis and constant ex-ante real interest rates?

According to Hayashi's Econometrics (page 151), efficient market hypothesis is a joint hypothesis combining: Rational expectations $\rightarrow$ expected inflation$= \mathbb{E}(\pi_{t+1}|I_t)$, where ...
3
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2answers
62 views

Prediction Interval for $E(y|X_0)$ when model is in $ln(y)$

Let's suppose we have linear regression with dependent variable $ln(y)$. How would one find a prediction interval for $E(y|X_0)$ ? If we have $PI(E(ln(y)|X_0))$, is there a way to reach $PI(E(y|X_0))...
3
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2answers
889 views

Laffer Curve Regression

I am doing some research on a potential U.S. Nationwide Sales tax. I found per-capita sales tax revenues and sales tax rates for each of the 50 states and conducted a quadratic regression on them. I ...
0
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1answer
218 views

Equilibrium Price - OLS Regression

I have asked another question related to price elasticity, which pretty much left me with this problem: I want to analyze the factors influencing the price of a product. The underlying assumption is ...
5
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2answers
642 views

Dealing with Missing Data when Testing the CAPM

Question How should I deal with missing data when trying to test the CAPM? Specifically, there are some stocks that are newly listed and/or delisted at any time. I don't want to exclude assets for ...
5
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2answers
124 views

Decomposition of an additive functional into a Martingale part and other

This question relates to a theorem about the decomposition of additive functionals---a technique especially useful in macroeconomics and finance. This question has two objective. First, I don't have a ...
4
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1answer
105 views

How do I construct the score process of a Markov model and verify that it is a Martingale?

The following is a specific question that is useful for demonstrating a general idea. Consider the following autoregressive model: $$ X_{t+1} = \alpha_0 + \beta_0 (X_t - \alpha_0) + W_{t+1}, $$ where ...
4
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1answer
333 views

How does the companies set up utility function for its own purposes?

How does the companies set up utility function for its own purposes? In another word, what is the types statistics data that is usually consider and statistical method being used to set up these ...
4
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3answers
724 views

How is the ARIMA model a valid approach for forecasting Economic Variables?

Ive noticed the use of univariate forecasting methods (i.e the ARIMA model) employed in forecasting inflation (see references below). How is this a valid approach in terms of forecasting economic ...
3
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1answer
408 views

Does it make sense to 'deflate' a sectoral price index in a regression analysis?

For instance, if one is running a regression with deflated prices for a given year and one of the independent variables is a price index for a given sector, does it make any sense to 'deflate' this ...
3
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1answer
259 views

VECM interpretation in Matlab?

After testing for cointegration with Johansen test using the following code [h,pValue,stat,cValue,mles] = jcitest(ret,'model','H1*','lags',4,'display','params') ...
2
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1answer
50 views

What metrics can be used to distinguish between capitalistic and socialistic economies?

What macroeconomic indicators are meaningful to distinguish whether a country leans towards socialism or capitalism (and where to find such data, specifically for european countries)?
2
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1answer
47 views

Heuristics with time series measured in dollars

Suppose the price indexes are adequately measured and there are no problems regarding the data in itself. By my experience, using a sector price index -- for the industry sector that you might be ...
1
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2answers
818 views

Formula for the unconditional variance of the sum of observations from an autoregressive time series

I have notes that say that we can make the following calculations. I'm a little confused about some of the calculations that are being made. What assumptions would I need to get the following results? ...
1
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2answers
604 views

Question on Fama-French Three Factor model

I am currently taking an econometrics course, and the final assignment in that course is to write a research paper using econometric ideas. I have read Fama and French paper on the three-factor model ...
1
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2answers
76 views

Proving the asymptotic normality of th Non-linear Least Squares estimator

Our model is $Y=X(\beta_0)+u$, where $u\sim IID(0,\sigma_0^2I)$, and $X(\beta)$ is a non-linear function of the beta. When trying to minimize the $SSR(\beta)$ we get the following FOC: $\nabla X(\...
0
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5answers
130 views

Which measure to check in analysis (p-values or $R^2$)?

In an analysis e.g. OLS regression which measure would you look at? $R^2$, $adjusted-R^2$ or $p-value$? How would you consider a regression with p-values >0.15 but with an $R^2$ of 40%? In general ...