# 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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### 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-...
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 ...
121 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 ...
571 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 ...
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 ...
34 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 ...
314 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 ...
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. ...
2k views

### What are some good graduate-level econometrics books for someone with a strong mathematics background?

Related: Book recommendations on empirical methods in economic research and econometrics? I would like to focus mainly on graduate texts in Econometrics. From the question above, I gather that ...
804 views

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### 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 ...
127 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 ...
659 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 ...
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### 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 ...
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### Re-evaluation of Consumer Price Index (C.P.I.) weights

How are the weights of the various household items in the Consumer Price Index (C.P.I.) basket decided, i.e., how are they re-evaluated every year? Is it done manually or automatically? If its done ...
755 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 ...
358 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 ...
423 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 ...
274 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') ...
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### 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)?
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### 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 ...