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. Only use this tag for questions relating to the theoretical aspect of an econometric technique.

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6
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1answer
52 views

Precision of language regarding "statistical significance" in Wooldridge's *Introductory Econometrics* (7th ed)

I've been reading Jeffrey Wooldridge's textbook Introductory Econometrics: A Modern Approach (7th edition) in preparation for a class I will be teaching. I've appreciated the precise language he uses, ...
1
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1answer
113 views

Why standard errors in country-level variables are higher than that in firm-level variables?

From this dicussion, the commentor said Lastly, firm fixed effects may absorb more variation and likely reduced the size of their standard errors. In practice, I also mainly see that the standard ...
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1answer
159 views

What are the difference between industry fixed effects and industry*year fixed effects?

In this paper, in column 4 Table 1, the author used firms fixed effects and industry*year fixed effect at the same time. I have two questions here: What does industry * year fixed effect mean? What ...
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1answer
99 views

Monte carlo simulation for macroeconomist

I would like to know if it is useful to learn Monte Carlo simulations if I want to focus on macroeconometrics ? Or even is it useful outside of academics ?
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1answer
72 views

How to classify sample by time-variant index?

In finance paper, we have a famous index representing for law is WGI (World Governance Index). I am wondering how we classify countries by this time-variant index as this paper below. It is easy to ...
3
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1answer
210 views

Calculating standard error

Consider a regression model on the form: $y_{i} = \alpha + \beta_{1}X_{i} + u_{i}$ (1) I am given $var(u_{i}|X_{i}) = 10$ and I know the OLS estimates for $\alpha$ and $\beta$ and using this I have ...
3
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1answer
45 views

Including an endogenous covariate in a regression model as a control to estimate the effect of another variable of interest

I am interested in the effect of an independent variable $x$ on a dependent variable $y$, like so $$ y = \beta_0 + \beta_1 x + e $$ where $e$ is the error term. Now $x$ includes two effects $z_1$ and $...
3
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1answer
39 views

Subsampling vs. m out of n bootstrap

My understanding is the distinction between subsampling and the m out of n bootstrap is that subsampling draws without replacement but the m out of n bootstrap does not. If we are not in a situation ...
0
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1answer
30 views

Whether we must cluster by country with staggered laws implementation?

When trying to find a way of avoiding using clustering, I saw that Abadie, 2017 have a great paper mentioned when we should cluster, summarized by McKenzie here. I used the paper of Dasgupta,2019 to ...
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1answer
91 views

Finding consistent but inefficient GMM estimate

Consider the following linear model $$y_t = x_t' \beta +u_t$$ where $t =1,...,T$ and $x_t = (x_{1t} x_{2t} ... x_{kt})'$ , $ \beta$ is $k \times 1$ vector of unknown coefficients, $u_t$ is an iid ...
2
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1answer
73 views

How to predict income n years after graduation using income dataset with age, but not graduation year?

I'm trying to predict the income of graduates of certain Master's programs n years after graduation, using the American Community Survey individual level dataset to calibrate my equation. It gives me ...
3
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1answer
327 views

What are the main differences among xtreg, areg, reghdfe?

Normally, when I run regressions for panel data in Stata using these three commands (xtreg,areg, ...
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1answer
280 views

What shoud we do when the expected treatment overlaps control sample in DID?

In a generalized Difference-in-Differences in Dasgupta,2019 paper, he documented that control countries did not have a leniency law introduced over 2 years before to 5 years after the introduction of ...
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0answers
14 views

Time series for contrasting empirically money demand and Taylor rules series

Non-cashless New-keynesian models often include discretionary monetary policy expressed as a Taylor rule: $1+i_t = (1+i)\left(\frac{1+\pi_t}{1+\pi}\right)^{\phi_\pi}\left(\frac{y_t}{y_t^n}\right)^{\...
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0answers
23 views

Is Hodrick-Prescott filter optimal with irregular component?

I need to extract cyclical component from time series, when doing seasonal adjustment I have the option to remove, apart from seasonal component, the irregular component. Then I'll apply HP to the ...
3
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1answer
34 views

When to use dynamic panel data models

I recently got a comment that I should use dynamic panel data model instead of a static one because my outcome is likely to be serially correlated. I guess it makes sense for my application, but it ...
1
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1answer
59 views

Cointegration in stock market between different market places

Hi guys im interested in cointegration in stock market between Brazil, USA, London, China, India, Argentina and Hong Kong. Since I want to compare each country’s index to the BR index, how do i do to ...
4
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2answers
657 views

Why we need at least 40 groups to be properly clustered?

From this discussion, I deem that we need approximately 40 groups for clustering. For example, if we want to clustered by industry, we need at least 40 industries, or if we want to cluster by year, we ...
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9answers
882 views

What are some further readings in Econometrics you recommend?

I've reached the end of my Econometrics courses for the undegraduate level at my university, but I would like to continue learning. I hope I could get some recommendations for further reading. I ...
0
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1answer
40 views

What should we conclude when the significant levels are different but the sign are similar among coefficients of variable of interest?

I saw the impact of anticollusion laws on dependent variables Y across the country by using generalized DID by following Dasgupta, 2019. The identification is: $Y_{it}$ = $\alpha$ + $\beta$ $(pt)_{kt}$...
2
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2answers
32 views

Intercept in 2nd-stage Error Correction Model (ECM) regression — yes or no?

When doing a two-step ECM regression, do we add an intercept in the 2nd stage regression? I've seen course notes that add an intercept in the ECM, but some do not, so I'm confused if I should include ...
1
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1answer
109 views

IV estimate for entire sample is larger than IV estimates for subsets of sample?

I am using two-stage least squares to estimate a local average treatment effect, with 'treatment' being the endogenous variable and 'assignment to treatment' being the instrument. If I use my full ...
3
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1answer
32 views

Fixed effects vs first difference

Or more generally, what are the reasons for the absolute dominance of the fixed effects estimators to control for unobserved heterogeneity in large N, short T panel settings? I get that random effects ...
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0answers
18 views

Beginner's Guide to Econometrics [duplicate]

I was wondering if you could guide me to a book that I can use as a starting point for preparing myself for graduate level econometrics. I will be applying for MA programs this fall and wanted a head ...
3
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2answers
94 views

What does "Difference-in-Diffrence" models with heterogeneous effects" mean?

Today, when reading this paper, page 3, I saw a sentence By decomposing the DD estimator into its sources of variation (the 2x2 DD’s) and providing an explicit interpretation of the weights in terms ...
0
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1answer
43 views

When we should use $R^2$ instead of adjusted $R^2$?

Following this topic, adjusted $R^2$ has been widely used to validate the trustable explanation adding of the additional independent variables. I am wondering when we should use $R^2$ instead of ...
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1answer
82 views

Why excluding intercept is dangerous if there is no literature back up in DID setting?

Recently, I run the regression for the generalised DID following this paper: $Y_{it}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$X_{ikt}$ + $\theta$$_t$ + $\gamma$$_i$ +$\epsilon$$_{it}$ (1)...
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1answer
38 views

What is the "dummy variable trap"?

I saw an interesting Economics post yesterday with the long comment. I post the regression result of the OP here I saw @chan1142 stated that Thanks. I see the _cons row. That's the intercept; the ...
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1answer
131 views

A revisit to simple DID and Generalised DID

After a couple of questions being asked, I am curious about the inclusion of Post and Treat variable in a simple DID (two groups two-time period). We mainly know there are mainly two types of DID ...
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1answer
95 views

What are the meanings of "difference-in-differences" and "causal estimand"?

In one discussion, I saw the answer containing two words that I think can be used interchangeably, but I am not sure if it's the case. I simply state in other posts that the "generalized" **...
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1answer
23 views

What does "dependent and independent variables only vary at the ($g,t$) level mean?

From de Chaisemartin and D'Haultfoeuille 2020, p.2969 I saw an equation $D_{g,t}$ $=$ $\alpha$ + $\gamma_g$ + $\delta_t$ + $\epsilon_{g,t}$ $D_{g,t}$ is the treatment in group $g$ at period $t$ They ...
3
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2answers
668 views

What is the difference between ATE and ATT?

I saw ATE and ATT in some discussions regarding DID settings recently. ATE is the Average Treatment Effect while ATT is Average Treatment Effects on Treated. I am wondering the difference between ...
2
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1answer
64 views

Why we need to add firm and year relating independent variables in two-way fixed effect model?

From what I know, these terms are very basic in econometrics but I still not yet fully got it. To me, year fixed effect is to control time-variant omitted variables and firm fixed effect is to control ...
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0answers
17 views

can i treat panel data as pooled data?

I'm working with panel data on Stata. However, I want to perform the ROC analysis and for what I know it is way simpler using the "logit" command instead of "xtlogit". Thus, my ...
0
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0answers
29 views

Asking for the exception of unparallel trend in DID testing

When reading this paper, The Common Trends Assuption section, p.457, I saw a paragraph: Researchers, however, must also think carefully about the conceptual reasons for which the common trends ...
2
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2answers
241 views

How to clarify the description of common trend assumption?

From reading a paper, I saw the way they describe the common trend is Specifically, DID designs assume that confounders varying across the groups are time invariant, and time-varying confounders are ...
3
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0answers
116 views

A doubt on summary statistic of post*treat variable of a paper using DID (Dong,2019)

Generalized DID or Staggered DID are DID using staggered treatment events. In Dong,2019's paper, he uses the framework as below: $Margin_{ikjt}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$...
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0answers
26 views

Advice on research methodology

I had wanted to ask this community for some advice on some potential methodologies I am developing. Context: I want to evaluate the effectiveness of a component of this scholarship program, which ...
1
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1answer
110 views

Is clustered standard errors the best way for all regressions that uses clustered data?

Using clustered standard errors assumes that the regression coefficients are the same for all the clusters in the data, right? What if they are not the same. For example, I have used F-test to compare ...
1
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1answer
176 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 $y$ ...
3
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0answers
49 views

Which statstical method/model should I use with my study?

my dear fellows. I mainly do experimental research, so I run experiments in which participants play a game repeatedly (for 20 periods for example). The dataset I get after the experiments would be ...
2
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2answers
62 views

Difference-inDifference model with Discontinued Treatment

I have a situation where I observe two groups A and B for three years. Group A never received any treatment. Whereas group B received treatment in year 2 only. I can estimate the impact of the ...
1
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1answer
33 views

K-step ahead forecast of VAR(2)

I am trying to determine how to write the K-step ahead forecast of a VAR(2), with two variables, as a weighted average of its mean and last observations. I understand that one must use companion form, ...
3
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1answer
54 views

Difference-in-Differences setup for policy evalution

I have a panel data set of housing prices from different neighborhoods in a city - and wish to test whether or not a policy has had an impact on the housing prices. The policy (treatment) is simply a ...
1
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1answer
21 views

How to obtain real money balances data

Theoretically real money balances ($m_t$) are defined as: $m_t=\frac{M_t}{P_t}$ Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical ...
0
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0answers
34 views

IRF vs Autocorrelation function of AR(2)

Will the impulse response function and autocorrelation function of an AR(2) coincide? I say that they will not, because $IRF_{t}(t+k)$ (that is, the effect of a unit shock at time $t$, on the process ...
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0answers
14 views

Best method for extracting cycle component of time series

I have macroeconomic time series data, including both quantity and proportion variables (i.e. aggregate consumption, unemployment rate, etc.). I want to work with the rawest version of the data, ...
3
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1answer
74 views

Interpretation of coefficients in a regression with a lagged dependent variable

I have estimated the following dynamic panel data model using GMM:           $\ln Y_{it}=\beta_0+\beta_1\ln Y_{it-1}+\beta_2\ln X_{it-1}+\epsilon_{it} $ where $Y$ is employment and $X$ is productivity....
2
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2answers
210 views

How to justify the treatment and control groups for Difference-In-Difference with staggered implementation of laws?

A. Background: Dong, 2019 and Dasgupta, 2019 used the same way to generate the treatment and control groups because they all learn about the impact of the same laws on different dependent variables. I ...
2
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1answer
53 views

Asymptotic variance vs. conditional variance in calculating regression estimator standard errors

I am given regression model $y_i=x_i^T\beta+\varepsilon_i$ with heteroscedasticity. Let $Avar(b)=E[x_ix_i^T]^{-1}E[\varepsilon_i^2x_ix_i^T]E[x_ix_i^T]^{-1}$ Hayashi's book states that regression ...

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